Draw a demand and supply curve for a competitive product, making sure to clearly label the axis. Give a brief explanation for why the resulting equilibrium is economically efficient
What will be an ideal response?
The level of output that maximizes the value of output to the economy is Q*. If Q is less than Q*, the value of the output to consumers is greater than the opportunity cost to suppliers, implying that suppliers could supply more units where that consumers value above their opportunity cost. If Q is greater than Q*, the opportunity cost of the suppliers is greater than demanders are willing to pay, implying an inefficient use of resources. Thus, the output level where the opportunity cost of suppliers is equal to the price that demanders are willing to pay is the economically efficient level since this implies that no resources are being used inefficiently.
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Consider the same ultimatum game as in the previous questions but consider yet new preferences reflecting envy. In particular, now assume players get 1 util per dollar earned. That is all for the player who earns at least as much as the other. The player who earns strictly less than the other loses 1 util for each dollar difference. Which of the following is an offer that arises in a
subgame-perfect equilibrium with these preferences? a. 1. b. 2. c. 4. d. 5.
Which of the following does not lead to the CPI underestimating increases in prices?
a. The substitution bias b. The quality bias c. The new outlet bias d. The housing bias