Unit 1
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
... [Show More] 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
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Answer
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.
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The 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 an 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
Scenario 2
2/2 points (graded)
Reconsider the invitation to dinner with slightly revised facts. Portia does not know
Professor Fried, but still wants him to attend her dinner to impress Vincent. She emails
Professor Fried, introducing herself, extending an invitation to dinner, and offering to
immediately pay Professor Fried $500 if he will attend the dinner. Professor Fried
accepts, but again decides not to attend the dinner at the last minute.
What were the promises made? Check All That Apply
Professor Fried will attend dinner.
Vincent will meet Professor Fried.
Professor Fried will contact Portia if his plans change.
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Portia will pay Professor Fried $500 for attending dinner.
correct
Was there an intent to create legal relations? Why or Why Not?
Yes, there was an intent to create legal relations because there was a bargain
between Professor Fried and Portia. correct
No, there no intent to create legal relations, because there was no formal agreement
between Professor Fried and Portia.
Frolic and Banter?
1/1 point (graded)
The law won't enforce contracts that are merely "frolic and banter" -- that neither side
takes seriously. Why do you think that is? Please choose the option you think is best,
and explain your reasoning in the discussion below.
Courts do not like being in the business of determining what is a joke and what is
not, so the burden should be on the people making the agreement to make it clear that
the agreement is not a joke. correct
People should be free to be silly without fear of legal retribution.
It would be ridiculous for courts to enforce contracts meant as jokes, and society
wouldn't stand for it if courts tried to enforce them.
Other reason (please explain in the discussion below)
Legally Enforceable Contracts?
3/3 points (graded)
Which of these three situations could be a legally enforceable contract? Read through
each situation and decide for yourself.
You and your father have been discussing Bill, a friend of yours whom your father has
always considered quite dimwitted. You defend Bill's drive, capabilities, and prospects at
his new job, but your father says to you, "If Bill ever gets promoted, I'll give you a million
dollars."
Is this a situation that can be a legally enforceable contract?
Yes
No correct
You are a fan of Argentina's soccer team and your friend is a fan of Germany's. After
heatedly discussing the strengths and weaknesses of the two teams for 45 minutes, you
each make a bet with the other that if your team wins the World Cup, the other will pay
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you $500. You shake on it, and (laughing because you think your friend is going to end
up paying you a lot of money) write down a short agreement on a napkin, which your
friend signs.
Is this a situation that can be a legally enforceable contract?
Yes correct
No
You and your cousin decide to take a trip to Florida together. You've been calling each
other to plan the details of your flights and hotels for weeks, and you agree that you will
buy the plane tickets and she will reserve the hotel. After you reserve and pay for both
tickets, your cousin cancels on you and refuses to pay because she found out you had
made some disparaging remarks about her housekeeping skills a couple of years ago.
Is this a situation that can be a legally enforceable contract?
Yes correct
No
Scenario 1
1/1 point (graded)
Mike has just received a job offer from Delivery Services, Inc. The employment contract
Delivery Services gives to Mike includes the following clause as a description of Mike’s
duties:
EMPLOYMENT CONTRACT FOR NIGHT DRIVER
The undersigned employee (“Employee”) shall work for Delivery Services, Inc.
(“Company”) as a night driver in the state of Ames, relieving day drivers to drive a
company truck on the package delivery routes designated by the Company between the
hours of 10 p.m. and 6 a.m., Eastern Standard Time. The Company shall compensate
the Employee $50 for each hour of work and shall ensure that the Employee is
scheduled for at least three shifts a week.
The state of Ames, extremely troubled by the large number of car accidents that have
been occurring at night, recently passed a regulation outlawing any person from driving
between the hours of 9 p.m. and 7 a.m. each day. Mike signs and returns his
employment contract to Delivery Services, Inc., but the company refuses to give him
any shifts after learning of the regulation.
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If Mike sues Delivery Services, Inc. for enforcement of the contract, what is the result?
He would win the lawsuit. The agreement is both legal and moral. Delivery Services
Inc. guaranteed at least three shifts each week between the hours specified.
He would win the lawsuit. The agreement is both legal and moral. Delivery Services
Inc. is obligated to provide alternative work.
He would lose the lawsuit. The agreement is illegal but moral. Delivery Services Inc.
is not obligated to perform its duties under the contract. correct
Which scenarios are enforceable bargains?
1/1 point (graded)
Read the scenarios presented below, and select the ones you believe to be enforceable
bargains that the law will stand behind.
(Select 2 Answers)
A) Caroline tells her sister Jean that if Jean will run Caroline's business for a month
while Caroline is away on vacation, Caroline will make the down payment on a new car
for Jean. Jean has wanted a new car ever since she got her Driver's License.
B) Mickey promises his son Michael, while he is dropping him off at his first day of
college, that Mickey will give him $200 of spending money every month.
C) A grandfather tells his granddaughter that if she quits her job, he will provide her
with an income.
D) Elsa promises her nephew Edgar that if he leaves his job to go back to business
school, she will pay his expenses for the two years he is in school, as long as he
chooses to attend a school in Boston, where Elsa lives, and agrees to visit Elsa once a
week.
correct
Scenario 1
2/2 points (graded)
Beth gets the following email from her best friend Anne:
On Thursday, April 3, at 2:52 PM, [email protected] wrote:
Oh my gosh, Beth, I NEED your help. I forgot that I am hosting a party for my niece’s
graduation this weekend. I don’t have any sort of food arranged. Because you are such
an incredible baker (and the greatest friend in the world), would you be able to bake 100
assorted cookies for the event? I know it’s a huge favor, but I would be eternally grateful
and would pay you $1,000,000 or whatever else your heart desires.
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If Beth responds, agreeing to bake the 100 cookies, can she hold Anne to her side of
the bargain?
Yes
No correct
Why or why not? Apply the principles Professor Fried has discussed thus far.
Which two principles are most relevent to this case?
Is there an Intent to Create Legal Relations?
Are Both Sides Serious?
Is this a Gift or a Bargain?
Is this a Legal and Moral contract?
Multiple Choice
0/1 point (graded)
Why did Mrs. Demotsis argue that this was not an enforceable bargain?
The exchange rate was awful.
Mrs. Demotsis proposed the exchange and Mr. Batsakis agreed to it without asking
for any additional terms, so there was no bargaining.
Mr. Batsakis hadn’t given the drachmae in exchange for anything, so this was a gift.
The two parties hadn’t intended to create legal relations.
Multiple Choice
1/1 point (graded)
The court decided that Mrs. Demotsis and Mr. Batsakis’ deal was a bargain (although
maybe a bad one). What was Mr. Batsakis compensated for?
A. Bargaining expenses
B. Compounding interest from the date he made the loan to Mrs. Demotsis
C. Risk correct
D. Litigation expenses
Drag and Drop
1/1 point (graded)
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Is an auction a fair way to settle on a price for something? Which details might imply
that an auction is fair or unfair? Label each detail using fair or unfair.
Detail Fair or Unfair?
Advertising the Auction in a
populous city correct
Advertising the Auction in a
deserted area correct
Holding the auction in a
deserted area correct
Holding the auction in a
populous city correct
Limited number of bidders
correct
Sellers Designating a minimum
bid price for their items correct
Winning bid is much less than
the item’s actual value correct
Numerical Input
2/2 points (graded)
General Average Problem
You’ve just learned about the concept of general average. Try applying it to the following
hypothetical:
Fair
Unfair
Unfair
Fair
Unfair
Fair
Unfair
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A cruise ship docks close to Rome for three days, giving the passengers plenty of time
to shop and take in the sights. Unfortunately, the passengers are a bit overzealous in
their purchases and fill the ship’s cargo beyond capacity. The ship’s cargo is worth
$100,000. Amanda, one of the passengers, spent the full three days shopping in the
stores along Via Condotti, Rome’s most fashionable street. Her cargo is valued at
$20,000. Barry, another passenger, spent his three days filling a suitcase with keychains
from souvenir stores. Barry’s cargo is valued at $200. To save the ship from sinking, the
captain must throw cargo overboard. He begins with Barry’s suitcase and continues
until the ship is no longer in danger, discarding $50,000 worth of cargo. Amanda is
relieved—all of her designer clothes managed to survive the captain’s purge. Barry,
however, is devastated—he had planned to add those keychains to his growing
collection at home, which nearly fills the garage.
Use the rule of general average to calculate the net cargo value Amanda and Barry will
each receive when the ship docks.
Please only enter your number without $ , or .
Amanda correct
10000
Barry correct
100 [Show Less]