a. Does the market provide an efficient amount of effort:i. No, too little effort.ii. None of these is correct.iii. No, too much effort.iv. Yes b. The teacher of the course is considering to implement a tax-cum-subsidy policy in order to enhance effort in the course. Suppose he seeks advice from you. He proposes to subsidize effort at the rates, meaning that putting G, units of time into working on the problem sets will feel less, concretely, only like putting (1-s)G, units of time. In order to subsidize effort, he will tax students' time at the rate t, so the total available time will become(1-1)W₁. What tax-subsidy combination would you propose in order to implement the social optimum while keeping budget balance?i. t=1/3 and s=1/2ii. t=1/4 and s=1/3iii. t=1/3 and s=1/3iv. t=1/4 and s=1/2 Maaike and Pim are VU students following the master course Advanced Microeconomics. Handing-inthe problem sets is obligatory and each group of students like the one formed by Maaike and Pim isrewarded with a common mark for their work. This implies that Maaike and Pim individual efforts onsolving the problems constitute public goods.Let us assume that Maaike and Pim derive similar utility from free time (F) and high marks (G) in thecourse according to the Cobb-Douglas utility function:UM(FM, G) = FG3,U (Fp, G) = F3G\!3where FM and Fp indicate the free time enjoyed by Maaike and Pim, respectively, and G is the jointeffort they put into the working of the problem sets.For simplicity let us assume that G is simply the outcome of giving up free time, so the productionfunction of G is simply:G = FG,where FG denotes the total amount of free time put in by the individuals (i.e. FGFG + F).Let us denote the total amount of time available to the individuals by W. Obviously,W = WM + W p.

The Cobb-Douglas utility function is a mathematical representation of consumer preferences that is…

a. Does the market provide an efficient amount of effort: i. No, too little effort. ii. None of these is correct. iii. No, too much effort. iv. Yes b. The teacher of the course is considering to implement a tax-cum-subsidy policy in order to enhance effort in the course. Suppose he seeks advice from you. He proposes to subsidize effort at the rates, meaning that putting G, units of time into working on the problem sets will feel less, concretely, only like putting (1-s)G, units of time. In order to subsidize effort, he will tax students' time at the rate t, so the total available time will become(1-1)W₁. What tax-subsidy combination would you propose in order to implement the social optimum while keeping budget balance? i. t=1/3 and s=1/2 ii. t=1/4 and s=1/3 iii. t=1/3 and s=1/3 iv. t=1/4 and s=1/2

a. Does the market provide an efficient amount of effort: i. No, too little effort. ii. None of these is correct. iii. No, too much effort. iv. Yes b. The teacher of the course is considering to implement a tax-cum-subsidy policy in order to enhance effort in the course. Suppose he seeks advice from you. He proposes to subsidize effort at the rates, meaning that putting G, units of time into working on the problem sets will feel less, concretely, only like putting (1-s)G, units of time. In order to subsidize effort, he will tax students' time at the rate t, so the total available time will become(1-1)W₁. What tax-subsidy combination would you propose in order to implement the social optimum while keeping budget balance? i. t=1/3 and s=1/2 ii. t=1/4 and s=1/3 iii. t=1/3 and s=1/3 iv. t=1/4 and s=1/2

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 6PA

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Of the four cells of the table, which gives the greatest combined benefits to Van and Carlos? When neither Van nor Carlos contributes to the public park When Van contributes to the public park and Carlos doesn't, or vice versa When both Van and Carlos contribute to the public park Now, consider the incentive facing Van individually. The following table looks similar to the previous one, but this time, it is partially completed with the individual benefit data for Van. As shown previously, if both Van and Carlos contribute to a public good, Van receives a benefit of $640. On the other hand, if Carlos contributes to the public park and Van does not, Van receives a benefit of $720. Complete the right-hand column of the following table, which shows the individual benefits of Van. Hint: You are not required to consider the benefit of Carlos. Carlos Contribute Contribute $640,-- Doesn't contribute $ Van Doesn't contribute $720, -- $ If Carlos decides to contribute to the public park, Van…