Marco runs an organic cafe in the middle of an industrial office zone. He has a lot of customers with only 6 allocated car parking spaces for them. Often, his customers use the car parks designated for clients at Eloise’s architectural studio nearby. Marco’s cafe does not produce any negative externalities. Marco’s cafe creates a negative externality for Eloise’s architectural studio. To be socially efficient, Marco needs to pay for more car spaces near his cafe. Which of the above statements are true: Only 1 is true. Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. All three are true.

Exercise 5.1 [10 pts] The benefits of price discrimination. ABC is a small village that offers nothing to do except liedown and enjoy the sun. CBA in turn is a larger town with lots of business going on. There are bars and restaurantsin CBA, but also the city hall, a hospital, etc. Even though many people in ABC have a car, there is some demand forpublic transportation. This demand is served by a single bus company enjoying a monopolistic position in the market.The bus company faces a constant marginal cost of providing a bus ride for each passenger equal to $2. That means,their cost function can be written as c(y) = 2y, where y is the number of passenger-rides.There are two groups of consumers in ABC. First, youngsters have more time and are happy to hang out in BCA.However, they are dependent on their parents’ allowance, so their demand for rides to BCA is pretty elastic. A linearfunction describes their inverse demand function:p(y) = − 12 y + 5The second group of customers are adults. They have more money, and a trip to BCA is sometimes more of a necessitythan a whim for them. Their inverse demand is also linear, but less elastic:p(y) = −y + 20(i) [1 pt] Draw the inverse demand functions for both adults and youngsters in the same graph. Do they intersect?Is there a range of prices for which youngsters will not use bus services at all whereas adults will still demand somerides?(ii) [3 pts] Derive the market inverse demand function for bus rides and plot it along with individual market demands.(iii) [2 pts] Suppose the monopolist transit company has not heard about price discrimination and maximizes its profitsfacing the market demand. Write down the monopolist’s objective and solve for the optimal price and quantity. Isany of the youngsters served in this equilibrium?

There are two parking lots near the local gym in a certain suburb - the silver parking lot and the gold parking lot. The silver parking lot is free and has 85 parking bays. The gold parking lot, on the other hand, has a parking attendant present where drivers are required to pay $3.50 per hour. The gold parking lot however has only 25 parking bays. Which of the following statements is true? The silver parking lot is considered a public good. The gold parking lot is considered a collective good. The silver parking lot is non-rivalrous in nature because there are many available parking slots. Both parking lots are rivalrous in nature. The gold parking lot is excludable in nature because it has a limited parking capacity relative to the silver parking lot.

5. Parking is a _____ problem for students at the university, and finding a parking space can be virtually impossible.largeimportantseriouslymajor

Suppose the cost of operating a 100 room hotel for a night is $10,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $30 and a customer is willing to pay $60 for the night, the hotel manager shouldGroup of answer choicesrent the room because the marginal benefit exceeds the average cost.not rent the room because the marginal benefit is less than the marginal cost.not rent the room because the marginal benefit is less than the average cost.rent the room because the marginal benefit exceeds the marginal cost.

6  In 2012 the local government of a city decided to increase parking charges for motorists. It was intended to raise money to correct a deficit in the local government’s budget. The local government said if they did not increase charges they would not be able to provide all their current services. Businesses complained about the likely loss of revenue if parking charges were increased.Which concepts does this statement involve?1 pointA inflation and the private sectorB opportunity cost and public expenditureC private benefit and the free marketD unlimited resources and a centrally planned economy