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Critical Thinking Consider a class of 25 Microeconomics students, s

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Critical Thinking: Consider a class of 25 Microeconomics
students, some of whom are confused about a concept
after a professor explains it. A student who reveals his
confusion by asking a question loses 10 utils. However,
when the professor clarifies the concept, each confused
student benefits 2 utils.
At what level of confusion (number of confused
students) is a question from a confused student socially
efficient?
Without participation incentives, will a confused
student ask a question when it would be socially efficient?
How will they know it is socially efficient?
How would you design an incentive system to
generate questions from confused students?
Solution
Cost to asker = 10 utils
Benefit to each student = 2 utils
a.
So, only when the minimum no. of confuse students will be
5, the question will be socially efficient.
This is because at ths point, MB (25*2) will equal MC
(5*10)
b.
Without participation benefits, it will not be socially

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Critical Thinking: Consider a class of 25 Microeconomics students, some of whom are confused about a concept after a professor explains it. A student who reveals his confusion by asking a question loses 10 utils. However, when the professor clarifies the concept, each confused student benefits 2 utils. At what level of confusion (number of confused students) is a question from a confused student socially efficient? Without participation incentives, will a confused student ask a question when it would be socially efficient? How will they know it is socially efficient? How would you design an in ...
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