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c) Which one of these three specifications provides evidence that the income elasticity depends on children? Find the income elasticity for those with and without children in this specification and in each case state whether cinema tickets are a necessity or a luxury. d) Why do all three researchers' specifications have different numbers of observations? Does this worry you or suggest that any of the specifications are better than any of the others? Explain your reasoning.Discussion Questions: 1. What is absolute advantage in trade theory? 2. What is the comparative advantage on international trade? 3. How does absolute and comparative advantage lead to specialization? 4. What are the benets of comparative advantage? Calculations: 1. The following represents the production possibilities in the following two countries. Canada Mexico Good X Good Y Good X Good Y 0 32 O 24 4 24 4 13 8 16 3 12 12 8 12 6 16 0 16 0 A statistician is observing values from a Bin(2. p) distribution. He knows that p is equal either to 14 or to 12, and he is trying to choose between these two values. He observes a single value x from the distribution. He proposes to use one of the following four decision functions: di ( x ) : Set p=14 when x=0 Set p =12 when x= 1 or 2 do (x) : Set p=14 when x=0 or 1 Set p =12 when x = 2 d3 (x): Set p= 14 when x=0. 1 or 2 dA( x): Setp=1/2 when x = 0, 1 or 2 If he incorrectly concludes that p= 14, he suffers a loss of 1. If he incorrectly concludes that p = 12, he suffers a loss of 2. Find the risk function for each decision function, and find the decision function that minimises the maximum expected loss.A statistician is observing values from a Bin(2. p) distribution. He knows that p is equal either to 14 or to 12, and he is trying to choose between these two values. He observes a single value x from the distribution. He proposes to use one of the following four decision functions: di ( x ) : Set p=14 when x=0 Set p =12 when x= 1 or 2 do (x) : Set p=14 when x=0 or 1 Set p =12 when x = 2 d3 (x): Set p= 14 when x=0. 1 or 2 dA( x): Setp=1/2 when x = 0, 1 or 2 If he incorrectly concludes that p= 14, he suffers a loss of 1. If he incorrectly concludes that p = 12, he suffers a loss of 2. Find the risk function for each decision function, and find the decision function that minimises the maximum expected loss.There are two friend, Quick and Slow, taking tough Econ 301 course. Both need to decide whether to do assignment themselves or wait until just it is due and the copy what the other has done. Quick finds the material easy and will get 8 out of 10 questions correct if he does the work while Slow will get only 5 out of 10. If both wait, hoping to copy the other's work, they will both get zero. (a) Write out this game in its strategic form. (b) Do either have the dominant strategy, and if so, what they are? (c) What outcome would you expect. Explain.1. Explain why a perfectly competitive firm would or would not advertise. 2. Does a Kansas wheat farmer fit the perfectly competitive market structure? Explain. 3. Consider this statement "A firm should increase output when it makes a profit." Do you agree or disagree? 4. Using the three characteristics of monopoly, explain why each of the following is a monopolist. a. Local telephone company b. Baltimore Ravens football team c. U. S. Postal Services 5. Why is the demand curve facing a monopolist downward sloping and the demand curve facing a perfectly competitive firm horizontal? 6. Compare the monopolistically competitive firms demand curve to those of a perfect competitor and a monopolist. 7. Draw a graph that shows how advertising affects a firm's ATC curve. Explain how advertising can lead to lower prices in a monopolistically competitive industry. 8. List four goods or services that you have purchased that were produced by an oligopoly. Why are these industries oligopolistic, rather than monopolisitcally competitive? 9. Why is mutual interdependence important under oligopoly, but not so important under perfect competition, monopoly, or monopolistic competition? 10. Evaluate the following statement: "A cartel will put an end to price wars, which is a barbaric form of competition that benefits no one."
