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Two individuals, A and B, are free to engage in trade of clothing and food. Initially, A has 12 units of clothing and 9 units of food, and B has 8 units of clothing and 11 units of food. The individuals have the following utility functions in clothing C and food F:
UA = 0.15QC ∙ QF
UB = 0.08QC ∙ QF
where QF represents units of food, QC represents units of clothing, and U represents utility. Determine if a mutually beneficial trade is possible between A and B. If so, who would trade for what?
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The market demand and supply functions for imported beer are: QD = 48,000 - 406.25P and
QS = 1,781.25P - 22,000. To encourage the consumption of domestic beer, Congress has imposed a quota of 25,000 units of imported beer. Calculate the change in producer surplus from this legislation.
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Some popular reality television programs follow people who buy the contents of abandoned storage lockers at public auctions. In most cases, several storeage lockers are sold in sequence during a particular auction. Occassionally, one of the buyers will purposefully bid much more than the expected value of a particular storage locker in order to intimidate the other bidders. What is a plausible explanation for these excessive bids?
A) The buyer is trying to establish a reputation that may affect the outcome of later auctions.
B) The excessive bids may be rational if they occur during the last auction of the day.
C) The bidder is trying to establish a first-mover advantage, but only if they occur during the first auction of the day.
D) The excessive bids represent a form of tacit collusion among the buyers.
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