If you increase production to an infinitely large level, the average variable cost and the average total cost will merge. Why?
(a) Present the summary statistics (mean, standard deviation) for all of the variables in states and time periods in which a Democrat won the gubernatorial election relative to those in which the Republican gubernatorial candidate won the
election, for black and white individuals separately. Briefly characterize this population and interpret the results [2 pt].
[Hint: use regress command using these predetermined and outcome characteristics as dependent variables, using option “if black2==1”; cluster standard errors at the state level using “cluster(state2)” option]
(b) Generate a set of Regression Discontinuity plots – for Black and White individuals separately – to show (a) the mean employment rate by win margin cell (using the margin of victory grouping cells (marginggg) as the running variable,
as well as (b) the fit of the relationship between group–specific employment rates and the running variable and potential discontinuity in states and time periods in which a Democract gubernatorial candidate won the election, using polynomial models. Interpret the results. [3 pts] [Hints: use collapse command, with option “by(marginggg black2) cw”. After running regressions on collapsed data and using the predict command to generate fits of the regression models, use the following graph command to generate each figure: twoway (scatter y x if z==1, xline(c_o)) (line y_hat x if z==1)]
(c) Using the larger dataset made available for the assignment, generate estimates of the discontinuity in employment rates of Black individuals using linear, quadratic, and cubic polynomial models on the running variable (margin of victory, or marginvvv), including state and year fixed effects. Assess the robustness of the estimates with and without predetermined individual controls (e.g., gender, age, education, marital status). Replicate the empirical exercise for White individuals. Interpret the results. [5 pts] [Hint: Estimate OLS regression models with i.state2 and i.year2 fixed effects, cluster standard errors at the state2 level]
(d) Generate analogous RD estimates using the local polynomial RD estimation using the Calonico, Cattaneo and Titiunik (2016) optimal bandwidth and robust (bias–corrected) confidence intervals procedure, for Black and White individuals separately. Interpret the results. [2 pts] [Hint: use rdrobust command using vce(cluster state2) option]
(e) Estimate the balance of predetermined covariates around the discontinuity as tests of the RDD continuity assumption using the available data, for Black and White individuals separately. For simplicity, you can use the Calonico, Cattaneo,and Titiunik (2016) rdrobust procedure. Interpret the results. What other tests could be conducted if you had access to the raw individual–level data? [3 pts]
(f) Bonus question: using the regression models in part (1c), test whether the election outcome at the discontinuity has statistically significantly different effects for Black and White individuals in these states. [No hints] [Bonus: 3 pts
Questions
(a) Estimate the OLS relationship between cistern ownership and clientelist private goods requests of citizens to politicians, with and without the inclusion of municipality fixed effects (ImunID2–ImunID40). Interpret the results. [1 pt]. [Hint: use regress command; cluster standard errors at the neighborhood cluster level using “cluster(clusters)” option]
(b) Estimate the effect of random assignment to the treatment group on (a) the probability of receiving a cistern (first–stage) , as well as on (b) the probability of making private requests to political representatives during the electoral period (reduced form), including municipality fixed effects (ImunID2–ImunID40) Interpret the results. [2 pts] [Hint: use regress command; cluster standard errors at the neighborhood cluster level using “cluster(clusters)” option]
(c) Estimate the effect of receiving a cistern on private requests exploiting the random assignment to the treatment group as an instrumental variable for cistern ownership, , including municipality fixed effects (ImunID2–ImunID40) Interpret the results. How does this IV estimate relate to the estimates from question b above? [4 pts] [Hint: use ivregress command; cluster standard errors at the neighborhood cluster level using “vce(cluster clusters)” option]
Questions
(a) Present the summary statistics (mean, standard deviation) for all of the variables in states and time periods in which a Democrat won the gubernatorial election relative to those in which the Republican gubernatorial candidate won the
election, for black and white individuals separately. Briefly characterize this population and interpret the results [2 pt].
[Hint: use regress command using these predetermined and outcome characteristics as dependent variables, using option “if black2==1”; cluster standard errors at the state level using “cluster(state2)” option]
(b) Generate a set of Regression Discontinuity plots – for Black and White individuals separately – to show (a) the mean employment rate by win margin cell (using the margin of victory grouping cells (marginggg) as the running variable,
as well as (b) the fit of the relationship between group–specific employment rates and the running variable and potential discontinuity in states and time periods in which a Democract gubernatorial candidate won the election, using polynomial models. Interpret the results. [3 pts] [Hints: use collapse command, with option “by(marginggg black2) cw”. After running regressions on collapsed data and using the predict command to generate fits of the regression models, use the following graph command to generate each figure: twoway (scatter y x if z==1, xline(c_o)) (line y_hat x if z==1)]
(c) Using the larger dataset made available for the assignment, generate estimates of the discontinuity in employment rates of Black individuals using linear, quadratic, and cubic polynomial models on the running variable (margin of victory, or marginvvv), including state and year fixed effects. Assess the robustness of the estimates with and without predetermined individual controls (e.g., gender, age, education, marital status). Replicate the empirical exercise for White individuals. Interpret the results. [5 pts] [Hint: Estimate OLS regression models with i.state2 and i.year2 fixed effects, cluster standard errors at the state2 level]
(d) Generate analogous RD estimates using the local polynomial RD estimation using the Calonico, Cattaneo and Titiunik (2016) optimal bandwidth and robust (bias–corrected) confidence intervals procedure, for Black and White individuals separately. Interpret the results. [2 pts] [Hint: use rdrobust command using vce(cluster state2) option]
(e) Estimate the balance of predetermined covariates around the discontinuity as tests of the RDD continuity assumption using the available data, for Black and White individuals separately. For simplicity, you can use the Calonico, Cattaneo, and Titiunik (2016) rdrobust procedure. Interpret the results. What other tests could be conducted if you had access to the raw individual–level data? [3 pts]
(f) Bonus question: using the regression models in part (1c), test whether the election outcome at the discontinuity has statistically significantly different effects for Black and White individuals in these states. [No hints] [Bonus: 3 pts]
1. What is achieved by selecting the quantity of an activity at which marginal benefit equals marginal cost?
2. Suppose the marginal benefit of an activity exceeds the marginal cost. What does the marginal decision rule say a maximizing decision maker will do?
3. Suppose you are a discus hurler and your goal is to maximize the distance you achieve. You “produce” discus hurls by practicing. The total benefit of practice is distance achieved, and the input that achieves this distance is hours of practice. Describe the total benefit curve of practice. What point on the curve would you select?
4. This chapter argues that consumers maximize utility and firms maximize profits. What do you suppose each of the following might be presumed to maximize?
a. A minister or rabbi
b. A United States Senator
c. The manager of a major league baseball team
d. The owner of a major league baseball team
e. The director of a charitable organization
5. For each of the following goods, indicate whether exclusive, transferable property rights exist and whether the good poses a problem for public policy. If it does, does the problem relate to a problem of property rights?
a. Clean air
b. Tomatoes
c. Housing
d. Blue whales
6. The dry-cleaning industry is a major source of air pollution. What can you conclude about the price and output of dry-cleaning services?
7. Economists often recommend that polluters such as dry-cleaning establishments be charged fees for the pollution they emit. Critics of this idea respond that the establishments would simply respond by passing these charges on to their customers, leaving the level of pollution unchanged. Comment on this objection.
8. Government agencies often require that children be inoculated against communicable diseases such as polio and measles. From the standpoint of economic efficiency, is there any justification for such a requirement?
9. Which of the following goods or services are public? Why or why not?
a. Libraries
b. Fire protection
c. Television programs
d. Health care
e. Water for household consumption
10. If a village in Botswana is granted several licenses to kill elephants, how does this give it an incentive to preserve elephants and increase the size of the herd? How does the international ban on ivory sales affect the incentive in Botswana to preserve the elephant?
11. The number of fish caught in the ocean has fallen in recent years partly as a result of more intensive
fishing efforts and the use of more sophisticated equipment. Fish in the ocean are a common property
resource. How might this fact be related to declining fish catches? How do you think this drop in the catch
affects the price of seafood?
1. Explain what is meant by market failure and the conditions that may lead to it.
2. Distinguish between private goods and public goods and relate them to the free rider problem and the role of government.
3. Explain the concepts of external costs and benefits and the role of government intervention when they are present.
4. Explain why a common property resource is unlikely to be allocated efficiently in the marketplace.
Based on the assigned readings, what is your understanding of perfect competition and monopoly? What the main characteristic of each market structure?
After evaluating the characteristic of perfect competition and monopoly, which market structure do you believe is close to the hotel industry in the U.S.?
Address each of the following based on your knowledge of how firms operate in different markets:
Why might a profitable motel shut down in the long run if the land on which it is located becomes extremely valuable due to surrounding economic development? What kinds of costs are involved in making a decision to shut down? – your textbook identifies a specific rule a business needs to follow top make a shutdown decision.
Which renewable energy source would be more economically and environmentally efficient: solar or wind?
We consider a sequential-move game in which an entrant is considering entering an industry in competition with an incumbent firm (see Figure 15-1). There are several possibilities of how this sequential game will be played. We want to use the Froeb rule of “look ahead and reason back.”
Instructions
Use Figure 15-1 from the textbook as your starting point to address the following:
Can, and how does, the entrant succeed? Is the incumbent ever in control of this game?
You may wish to review the old game known as Duopoly, as well as Antoine-Augustin Cournot, to help inform your post.
Note: Do not rely on Wikipedia, Investopedia, or any similar website as a reference or supporting source.
If you increase production to an infinitely large level, the average variable cost and the average total cost will merge. Why?
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