Four friends decide to meet at a Chinese restaurant for dinner. They decide that each person will order an item off the menu, and they will share all dishes. They will split the cost of the final bill evenly among each of the people at the table. A Tragedy of the Commons problem is likely for each of the following reasons exceptGroup of answer choiceseach dish would be both excludable and rival in consumption.when one person eats, they may not take into account how their choice affects their friends.there is an externality associated with eating the food on the table.each person has an incentive to eat as much as possible since their individual rate of consumption will not affect their individual cost.

Tragedy of the commons arises because: Group of answer choicesExternal benefits are under-producedPublic goods are over-consumedCongestion reduces private benefitsThose consuming common resources don’t consider collective cost

Question 1 Three friends, Alice, Bob and Carol, have the following individual preferences over the food they usually get: Chinese, Indian and Italian. Alice Bob Carol Most preferred Chinese Italian Indian Indian Chinese Italian Least preferred Italian Indian Chinese Jointly, they agree to determine their group preference as follows: Cuisine A is preferred to B if A gets the majority of votes against B in a two-alternative vote. • What is the group’s preference over Chinese and Indian food? • What is the group’s preference over Indian and Italian food? • What is the group’s preference over Chinese and Italian food? • Is the group’s preference over the three cuisines transitive? Why or why not? Question 2 In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly. (Hint 1: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on? Hint 2: Think about the existence of potential substitutes.) Question 3 Suppose there are only two goods: Beer and Milk. Tom’s preference over bundles of beer and milk is as follows: For any two bundles A = (bA, mA) and B = (bB, mB) (where b and m denotes the amount of beer and milk, respectively), A ≿ B (i.e., “A is at least as good as B”) if and only if: Either bA > bB; Or bA = bB and mA ≥ mB. In other words, Tom cares, first and foremost, about the amount of beer, but if the two bundles contain the same amount of beer, then he prefers having more milk to less. • Is Tom’s preference complete? If yes, show why; if no, give an example of two bundles between which Tom cannot compare. • Is Tom’s preference monotone? Strongly monotone? • Does Tom’s preference comply with the property of diminishing marginal rate of substitution?

One economically efficient way to eliminate the Tragedy of the Commons is toGroup of answer choicestax the owners of the resource.prevent anyone from using the resource.reduce the marginal social benefit of the resource.establish private ownership of the resource.

A number of friends decided to go on picnic and planned to spend Rs 108 on eatables. Three of them however did not turn up. As a consequence each one of the remaining had to contribute Rs 3 extra. The number of them who attended the picnic was:__________151296

What is the tragedy of the commons?  A. A situation where common resources are overused due to individual self-interest  B. A situation where externalities are perfectly managed  C. A state of maximum cooperation  D. A situation where externalities do not exist