Contract_Law_FULL - Deadweight Loss Problem 1 -Vera and Vladimir live in the Arctic. Vera is an expert ice fisher, and Vladimir is an excellent hunter. Neither is any good at the other activity – Vera is a terrible hunter, and Vladimir is awful at fishing.

Deadweight Loss Problem 1 2/2 points (graded) Vera and Vladimir live in the Arctic. Vera is an expert ice fisher, and Vladimir is an excellent hunter. Neither is any good at the other activity – Vera is a terrible hunter, and Vladimir is awful at fishing. Vera can only ice fish in the winter, but she can freeze what she catches to eat during the summer. Vladimir can only hunt in the summer, but he can’t freeze what he kills. It’s winter, and all of the meat that Vladimir killed during the summer has been eaten or has spoiled. He’s hungry. He sees that Vera is still slowly but surely catching fish, and that she isn’t eating all of them – she’s freezing the extras. He asks her if he can have some of her extra fish, but she says no, because she needs to freeze them so she’ll have something to eat in the summer, when she can’t fish. As a result, Vladimir doesn’t have anything to eat. What is the deadweight loss in this situation? Vera is freezing her extra fish. Vladimir has nothing to eat in the winter. correct Vera won't have anything to eat in the summer. Vladimir will be unable to eat all of the meat he catches. Answer Correct: You are correct. The food is inefficiently allocated between Vladimir and Vera, so Vladimir does not have anything to eat during the winter. Why is this deadweight loss happening? Vera and Vladimir do not trust each other; therefore, Vladimir cannot make a promise to give Vera meat in the summer in exchange for fish. Vladimir cannot fish; therefore, Vladimir is going hungry. They cannot agree on a fair price for fish, therefore Vera does not want to sell her fish. They cannot trade, therefore they are unable take advantage of the surplus produced by the other. correct Schlumberger-PrivateAnswer Correct: This is the correct answer. If Vladimir and Vera figured out a way to trade their surplus food, they could both have enough to eat throughout the year. Deadweight Loss Problem 2 2/2 points (graded) Alex and Amy are at a company dinner, where there is exactly one roll of silverware per person. Amy picks up a roll that accidentally contains two knives and no spoon, and discovers she has no way of eating her soup. Amy buttered and ate her bread. Meanwhile, Alex opens his roll to see that he has two spoons and no knife. He has some trouble buttering his bread, but he figures out a way to butter it with the spoon. This draws disapproving frowns from those around him. He has no trouble eating his soup. The dinner is very large, and Amy tries to search the room for someone with an extra spoon. But there are too many people, so she gives up. What are the deadweight losses in this situation? (Select 2 Answers) Amy could not eat her soup. Amy ate her bread. Alex made a mess buttering his bread. Amy wasted her time looking for a spoon without any success. Alex ate his soup. correct Answer Correct: Correct. If Amy had the extra spoon, she could have eaten her soup. Correct. If Alex had Amy's extra knife, he could have buttered his bread without making a mess. What is causing it? (Select 1 Answer) Each person has only one roll of silverware. Alex has made both of his spoons dirty. Schlumberger-PrivateThe room is too large for Amy and Alex to find each other and trade. correct Scenario 1 2/2 points (graded) Albert is in the fourth grade and loves video games much more than he loves studying-- so much so that he has consistently been getting 20% on his homework assignments. Albert’s mother is concerned and tells him that she wants him to work harder in school. She bribes him, saying that she will cook Albert whatever he wants for dinner Friday night if he gets 100% on all of his homework assignments for the week. On Friday afternoon, Albert comes home from school and proudly shows his mother his last homework assignment, with yet another 100% written at the top. He then requests that a seven course steak dinner. What was the promise made? Albert's mother promised him a new video game, if he stops getting only 20% on his homework assignments. Albert’s mother promised to cook him whatever he wants for dinner Friday night if Albert got 100% on all of his homework assignments for the week. correct Albert’s mother promised to cook him whatever he wants for dinner Friday night if Albert got 100% on his last homework assignment for the week. Was there an intent to create legal relations? Why or why not? Yes, because there was bargain made between Albert and his mother. The parties have a formal relationship (mother and son) that could be considered legally binding Yes, because there was a bargain made between Albert and his mother. No, because there was no bargain made between Albert and his mother. The parties have an informal relationship (mother and son) and do not intend to be legally binding correct