1 As a way of deciding the amount of a continuous public good to provide, will a majority voting rule (i.e., a majority of voters would have to approve an increase of decrease in the amount of the public good, with the costs shared evenly among voters) result in the socially efficient amount? Why or why not? 2 Consider the education signaling model from class. If the cost of obtaining an education were zero for both the high-type and the low-type agent, would you expect there to be a separating equilibrium? Why or why not? State the Second Fundamental Theorem of Welfare Economics. 3 Consider a risk-neutral principal and a risk averse agent. The agent has two actions available to him, x and y with associated costs to the agent of c(x) and c(y), respectively. The principal is trying to induce the agent to take action x. 4 What must be true for the principal to offer a full insurance contract? Why would a full insurance contract be efficient in this scenario