The process by which price and output are determined in the real world is strongly affected by the structure of the market. A market consists of all the actual and potential buyers and sellers of a particular product. Market structure refers to the competitive environment in which the buyers and sellers of the product operate. Four different types of market structure are usually identified. These are perfect competition one extreme, pure monopoly at the opposite extreme, and monopolistic competition and oligopoly in between.

Under what conditions can we be sure that perfect competition leads to a more efficient use of society's resources than monopoly? How prevalent are these conditions in the real world?

1. Explain what means that a resource allocation is efficient and describe the (marginal) conditions that such allocation will satisfy. Also define the concept of perfectly competitive equilibrium and explain why, in principle, such market outcome should be expected to be efficient. Define the concepts of total surplus value, consumers' and producers' surplus, total and marginal benefit, total and marginal cost, supply, demand and competitive equilibrium as part of your answer.

2. Suppose that the marginal cost of extracting a non-renewable natural resource is MXC(Q) = 10 and the marginal benefit of using the resource is MB(Q) = 90-Q. In the context of a static model, address the following questions.

(a) Calculate the efficient value of Q if the total stock of the natural resource is Q = 50: Provide a graphical representation of the solution.

(b) Calculate the efficient value of Q if the total stock of the natural re source is Q = 200: Provide a graphical representation of the solution.

(c) Suppose that there is a market for the non-renewable natural resource in question. Which is the equilibrium price and quantity?

3. Address the following:

(a) Define the concepts of discount rate, discount factor and present value.

(b) Suppose that the allocation of a natural resource during three years results in a stream of total surplus value of $100 per period t (i.e.: t = 0, 1,2). Obtain the present value of this stream when the discount rate is r = 0:10 and also when it is r = 0.05.

(c) Alternatively, the resource could be fully extracted now (say, in the period t = 0), resulting in a total surplus $280 at t = 0 and 0 in every future period. Is this immediate extraction strategy preferred to the extraction strategy described in (a) when r = 0:10? What about when r = 0.05? What does this tell us about the intuitive meaning of discounting regarding intertemporal preferences?

(d) Explain what it means that a resource allocation is dynamically efficient.

4. Consider the intertemporal allocation of a non-renewable natural resource.

(a) Describe the (marginal) conditions that a dynamically efficient allo cation must satisfy, carefully describing the relevant opportunity cost of a resource unit at a given period (including both extraction and user costs).

(b) Will the intertemporal allocation of the resource by a perfectly competitive market be dynamically efficient? Why?

(c) Focusing on the case in which the marginal cost of extraction is 0, argue that the intertemporal price path will satisfy the Hotellings Rule, relying on a no-arbitrage argument to justify it. Will the corresponding path of quantities extracted increase or decrease over time?

(d) Based on the Hotellings Rule, we might expect the price of non renewable resources to increase continually over time, as resource stocks are depleted. However, empirical evidence for a number of mineral resources suggests that prices have not been increasing monotonically over the past century. Try to explain this apparent anomaly between theory and observation.

5. Consider the following two-period model of dynamically efficient extraction of a non-renewable natural resource. The constant social marginal cost of extraction is 40 in each period and the total stock of the resource is Q = 300 units. Moreover, the social marginal benefit is MB(Qt) = 200Qt, where Qt is the quantity of resource extracted in period t, for t = 0; 1. The discount factor is 0:8.

(a) What is the efficient quantity of resource extracted in each period? Provide a graphical representation of the solution.

(b) What is the marginal user cost (or scarcity rent) of the resource in each period?

(c) Suppose that there is a market to trade the resource. What is the equilibrium price corresponding to each period? Justify the answer.

Is Property 2 of the definition of a probability density function over the given interval now verified? Choose the correct answer below. O A. Property 2 of the definition of a probability density function over the given interval has been verified since the expression in the previous step equals b. O B. Property 2 of the definition of a probability density function over the given interval has not been verified because the expression in the previous step does not equal the expected area value. O C. Property 2 of the definition of a probability density function over the given interval has been verified since the expression in the previous step equals a. O D. Property 2 of the definition of a probability density function over the given interval has been verified since the expression in the previous step equals 1.6 Problem The article \"Markov Chain Model for Performance Analysis of Transmitter Power Control in Wireless MAC Protocol\" 21 st International Conference on Advanced Networking and Applications, 200?) describes a Markov chain model for the state of the communication channel using a particular \"slotted non-persistent\" (SNP) protocol. The channel's possible state are (1) idle, (2) successful transmission and (3) collision. For the particular values of the authors' proposed four parameter model, we get the following transition matrix 0.50 0.40 0.10 P: 0.02 0.98 0 0.12 0 0.88 1. Verify that P is the transition matrix of an Ergodic (regular) Markov Chain. 1. Verify that P is the transition matrix of an Ergodic (regular) Markov Chain. 2. Determine the steady state probabilities for this channel. 3. What proportion of the time is the channel idle, in the long run. 4. What is the average number of time steps between successive collisions? Utilitarianism is: A theory from moral philosophy that argues that an act is right if it serves to maximize the attainment of human satisfaction. OA theory from moral philosophy that argues that profit and financial well-being are important parts of evaluating an ethical situation and should not be ignored or dismissed. A theory from moral philosophy that argues that we should always choose the action that will best benefit us as individuals Question 4 2.5 pts The author, Kelman, analyzes cost-benefit analysis through the lens of ethical theory. He argues for three conclusions. Which of the following IS NOT one of Kelman's conclusions? O In areas of environmental, safety. and health regulation, there may be many instances where a certain decision might be right even though its benefits do not outweigh its costs. Of Given the reasons why it is problematic to monetize non-marketed benefits or costs that is a prerequisite for cost-benefit analysis, it is not justifiable to devote major resources to the generation of data for cost-benefit calculations or to undertake efforts to further promote cost-benefit analysis. Getting decision-makers to make more use of cost-benght techniques is important enough to warrant both the expense required to gather the data for improved cost-benefit estimation and the political efforts needed to give the activity higher priority compared to other activities, (): There are good reasons to oppose efforts to put dollar values on on-marketed benefits and costs