1. If 3 voters have a reservation price for each and they would like to share the cost among themselves equally, will the majority voting rule give the efficient amount of public good? Why/Why not?
2. If there is no cost for education (signaling) , then which of the three equilibrium we discussed in class ( separating equilibrium pooling equilibrium with no education and pooling equilibrium with education ) , is going to be experienced in this situation. Explain.
3. State the second theorem of welfare economics
4. If the agent has two type of actions ( x and y ) and principal have no idea which type the agent is , and principal wants him to induce him to induce x effort whereas the cost function for x is c(x) and cost function for y is c(y). To offer him full insurance contract what must be true for the principal? Is offering the full insurance contract efficient for the principal in this case ?