Economics Homework Solutions

This document presents solutions to various economics problems. It covers concepts such as price discrimination (first and second-degree), peak load pricing, the prisoner's dilemma, and externalities (positive and negative). Specific examples are used to illustrate these concepts, such as a shop owner's pricing strategy during a fire, the competitive strategies of Coles and Woolworth, and the externalities associated with beekeeping and smoking. The solutions also discuss government interventions like taxation and command-and-control policies to address negative externalities. Finally, a numerical answer is provided for a seemingly unrelated problem, suggesting a diverse range of economic topics covered within the assignment.

Michael is first degree price discriminating.
Charging more during River Fire is an example of Peak load pricing.
The Peak Load Pricing is the pricing strategy wherein the high price is charged for the goods and
services during times when their demand is at peak. This is what exactly happened here.
The other three options are not correct.
It is NOT a second-degree price discrimination that reflects quantity discounts. First option is
incorrect.
There is no information regarding cost. So third option is incorrect
Helen definitely has the pricing power. So last option is also incorrect.

When compared to Woolworth and Coles, Cotsco could be argued to be engaging in second degree
price discrimination.
This is correct because second degree price discrimination only deals with quantity discounts for
larger quantities.
If Coles and woolsworth both decide to choose a strategy that results in significant losses for both of
them they are likely facing a Prisoner’s Dilemma
For statement 2 above, if Coles and Woolsworth follow the strategy resulting in significant losses for
both of them, it would have resulted in them both playing their dominant strategy.
a. Prisoner’s Dilemma
b. Yes

a. Yes
b. LB
c. Y
d. Y
The marginal social cost of smoking could be represented by a line that is to the right of the
private marginal cost line.
There is an external benefit associated with Jason keeping bees.
Bee pollination is a good example of positive externality. The bees of Jason help to pollinate the
crops of the farmers. Thus a positive external benefit is associated with Jason keeping bees.

In addition to plain packaging the Government could reduce the amount of cigarettes sold through
Increasing tax on cigarettes.
The decision by a shop owner to sweep up cigarette butts on the footpath outside their shop could
be considered a negative externality for the environment.
Banning smoking in public would be an example of the government using Command and Control.
$199.
a. T
b. F
c. F