HH The problems are provided below. tt the question is okay plz

Problem 1.

Radish farmer's cost function is given as follows:

CR = R 2 + 8 (1)

Fishing company's cost function is expressed as follows:

CT (R, T) = T 2 + T R + 4 (2)

Suppose the prices for radish and fishing trip are PR = 11, PT = 10. 1.1. Derive farmer's and fishing company's marginal cost function.

1.2. Suppose the farmer and fishing company merged. Write down the profit maximization problem of the merged firm, and solve the efficient allocation (i.e. efficient radish(R), fishing trip(T) and the profit of the merged firm). From now, we assume the farmer and fishing company cannot be merged.

1.3. Suppose the property right (i.e. right to emit pollutants from fertilizer) is not clearly assigned to anyone. Write down the profit maximization problem of the farmer and fishing company, and solve each firm's profits (?R, ?T ) and the levels of production (R, T). Compare the each firm's profit with the profit of the merged firm.

1.4. Now, we assume that the property rights are assigned to the fishing company (victim). Find the profits of the fishing company and the farmer, and the production of the radish(R) and fishing trip (T).

1.5. Now, we assume that the property rights are assigned to the farmer (polluter). Find the profits of the fishing company and the farmer, and the production of the radish(R) and fishing trip (T).

1.6. Describe the Coase theorem with the results of 1.1 to 1.5.

Consider now the non-trivial case (?) 1(p, w). Rewrite (-p)-(=(, ) - (p?)) = p. (1(P?)-(p,w))-p-(x(P, w')-1(p,w)). Consider separately each term of the right-hand side. Derive the signs of each of the two terms using (some) assumptions of the proposition and the fact that we assumed '-p-rp.) for the compensated law of demand. To derive the sign of the second term of the right-hand side you will need to make use of the weak axiom of revealed preference. 3. Put everything together to conclude the proof of the first direction. c.) Given the characterization of the compensated law of demand by the weak axiom of revealed preference, you need to explain to your grandmother the meaning of the weak axiom of revealed preference. Provide a verbal interpretation of the weak axiom of revealed preference. d.) The weak axiom of revealed preference may be viewed as a condition on the "consistency of consumer choice. We may be inclined to label a consumer violating this condition as being irrational (unless a more complex setting is considered). So the above proposition characterizes the compensated law of demand in terms of consistency of consumer choice. But is it really a characterization in terms of rational consumer choice in the sense of having complete and transitive preferences over consumption bundles? That is, is the following conjecture true? Conjecture: Suppose that the Walranian demand function r(p, w) is homogeneous of degree zero and satufes Walras law. Then zip, w) satisfies the compensated law of demand if and only if the consumer has complete and transitive preferences over consumption bundles Consider both directions of the conjecture separately. Moreover, consider the special case of L2 separately. [You don't have to present a detailed proof You can make use of results learned in class. The line of arguments should be clear)

\f10. Employing a lawyer to draft and enforce a private contract between parties wishing to solve an externality problem is an example of a(n) cost opportunity b. implicit c. sunk transaction 11. The government provides public goods because private markets are incapable of producing these types of goods D. free-riders make it difficult for private markets to supply the socially optimal quantity C. markets are always better off with some government oversight d. external benefits will accrue to private producers 12. To gauge the sacrifice made by a taxpayer, we should use the tax rate a. marginal b. average C. solos d lump-sum 13. Since the 1980s, Wal-Mart stores have appeared in almost every community in America. Wal-Mart buys its goods in large quantities and, therefore, at cheaper prices. Wal-Mart also locates its stores where land prices are low, usually outside of the community business district. Many customers shop at Wal-Mart because of low prices. Local retailers, like the neighborhood drug store, often go out of business because they lose customers. This story demonstrates that consumers do not react to changing prices b. there are diseconomies of scale in retail sales C. there are economies of scale in retail sales d. there are diminishing returns to producing and selling retail goods 14. For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the i. average total cost curve b. average variable cost curve c. buyers marginal cost curve