Which of the following conditions is necessary in order for the private market to efficiently solve an externality problem?
a. The person who creates the externality must have the legal right to do so.
b. The person harmed by the externality must have a legal right to be compensated.
c. The value of any side payment must be smaller than the marginal cost of producing the externality.
d. The value of any side payment must be smaller than the marginal cost of creating the externality.
e. Side payments must be arranged without cost.
E
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Following Alfred Nobel's will, there are five Nobel Prizes awarded each year. These are for outstanding achievements in Chemistry, Physics, Physiology or Medicine, Literature, and Peace
In 1968, the Bank of Sweden added a prize in Economic Sciences in memory of Alfred Nobel. You think of the data as describing a population, rather than a sample from which you want to infer behavior of a larger population. The accompanying table lists the joint probability distribution between recipients in economics and the other five prizes, and the citizenship of the recipients, based on the 1969-2001 period. Joint Distribution of Nobel Prize Winners in Economics and Non-Economics Disciplines, and Citizenship, 1969-2001 U.S. Citizen (Y = 0) Non= U.S. Citizen (Y = 1) Total Economics Nobel Prize (X = 0) 0.118 0.049 0.167 Physics, Chemistry, Medicine, Literature, and Peace Nobel Prize (X = 1) 0.345 0.488 0.833 Total 0.463 0.537 1.00 (a) Compute E(Y) and interpret the resulting number. (b) Calculate and interpret E(Y =1) and E(Y =0). (c) A randomly selected Nobel Prize winner reports that he is a non-U.S. citizen. What is the probability that this genius has won the Economics Nobel Prize? A Nobel Prize in the other five disciplines? (d) Show what the joint distribution would look like if the two categories were independent. What will be an ideal response?
When the price of a cup of coffee falls from $3.00 to $2.50, the quantity demanded increases from 1,000 per month to 1,150 per month. Using the midpoint method, the price elasticity of demand is
A) 0.77. B) 1.30. C) 0.07. D) 3.00. E) 2.50.