Question

6. An individual consumes two goods and her preferences satisfy non-satiation. It follows that at least one of the two goods must be a normal good. Is this true or false? Explain your answer. (5m)

7. Under first-degree price discrimination, a monopolist produces the efficient output. Is this true or false? Explain using an appropriate diagram. 8. Several generators pollute the environment by emitting carbon dioxide. Generators have different costs of reducing carbon emissions. The government wants to put a cap on total emissions. Putting a cap on each generator is more efficient compared to issuing tradeable emissions permits to each generator. Is this true or false? Explain your answer. (5m)

Answer 1