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This is a chance to earn more points (up to 20)

Economics

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This is a chance to earn more points (up to 20). Effort matters. You may still get a high score on this problem set even if every answer is not exactly correct as long as you are close and show that you really tried. 

And, please reach out for help. Come to Zoom office hours or email me any time. My goal is to work with you on these. 

Click the following link to download the problem set for this module. If you would like to access this material in a different format please let me know and I am more than happy to help provide the material in another way:

• Public Goods and Externalities Problem Set

  Public Goods Problem Set^[1]

   

   

  Use the following information to answer questions 1 through 3:

  Consider the following prisoner's dilemma with the payoff matrix (Numbers represents years in prison):

   

  

   

   

  1. What is the dominant strategy for player A?

• Contribute.
• Do not contribute.
• There is no dominant strategy.

•  

  2. What is the dominant strategy for player B?

• Contribute.
• Do not contribute.
• There is no dominant strategy.

•  

  3. What is the Nash Equilibrium?

• $0, $0
• $-7, $21
• $14, $14
• $21, $-7
• There is no Nash Equilibrium.

•  

  Use the following information to answer questions 4 through 9:

  Suppose that there is a positive externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls.

   

  

   

  4. What is the market equilibrium quantity?

   

  5. What is the market price?

  6. What is the optimal quantity?

   

  7. What should the government do in order to ensure the market produces optimal (efficient) quantity?

• Impose corrective taxes (Pigovian taxes)
• Do nothing.
• Impose corrective subsidies (Pigovian subsidies).

•  

  8. How big should the government's corrective taxes or subsidies be in this case?

   

  9. As a result of the positive externality, this market

• over produces.
• produces the optimal (efficient) amount.
• under produces.

•  

  Use the following information to answer questions 10 through 15:

  Suppose that there is a negative externality in the market for pizza rolls. The graph below shows the supply and demand curves for pizza rolls.

   

  

   

   

   

  10. What is the market equilibrium quantity?

   

  11. What is the market price?

   

  12. What is the optimal (efficient) quantity?

   

  13. What should the government do in order to ensure the market produces optimal (efficient) quantity?

• Impose corrective taxes (Pigovian taxes)
• Do nothing.
• Impose corrective subsidies (Pigovian subsidies).

•  

  14. How big should the government's corrective taxes or subsidies be in this case?

   

  15. As a result of this negative externality, the market

• over produces.
• produces optimal (efficient) amount.
• under produces.
•  

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  ^[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.