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Suppose that the preferences a typical American has for quantities of electricity (E) and gasoline (G) is given by U(E,G) = a ln(E) + (1 - a) ln(G)
Where 0 < a < 1. Suppose the prices of gasoline and electricity in the units provided are both $1/unit and the consumer has an income of $100. Suppose in addition, the government has chosen to ration electricity by allowing a maximum consumption of 50 units of electricity (E ≤ 50).
a. If a = .25, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint have an influence on consumer's choice?
b. If a = .75, find the optimal consumption bundle of gasoline and electricity. Does the electricity rationing constraint of the government have an influence on the consumer?
How will firms react to rising output price levels? What reactions can they expect from their employees and suppliers over time?
Voters in the State of California decide that the tobacco industry is having too great an impact on the outcome of local referenda limiting smoking in public places.
Suppose a firm faces the demand curve which gives a constant price elasticity of demand of -2. (Lerner Index) If the firm's marginal cost is constant at $2, what is the profit-maximizing price and quantity? If the firm's marginal cost increases to a..
Gold cost $100 an ounce at the beginning of 1971. At the beginning of 2015, gold was $1200 per ounce. By what compound annual percentage rate has the price of gold increased over this period? State the answer as a percentage, to two decimal places.
This table shows a game played between two firms, Firm A and Firm B. In this game each firm must decide how much output (Q) to produce: 10 units or 12 units. The profit for each firm is given in the table as (Profit for Firm A, Profit for Firm B).
Give an example of an organization or business in your area that performs the "place" function, and explain why you picked this organization/business.
Draw a production possibilities curve for the pleasure you get between hanging with friends and from doing your Economics problem set.
The company's settlement obligations are expected to raise its average total cost per pack by about $60. Illustrate what effect will this have on its optimal price.
Comment on the following statement: “The free market allows hospitals to enter markets too easily; and regulators can potentially improve social well-being by restricting entry.”
In which of the three market arenas is each of the following goods traded?
According to national income accounts, investment always equals savings in a closed economy. only in equlibrium would savings be equal to investment. hence, we are always in equlibrium. true or false.
Clear Water Company has a down-hole well auger that was purchased 3 years ago for $30,000. O&M costs are $13,000 per year. Alternative A is to the keep the existing auger. It has a current market value of $12,000 and it will have a $0 salvage value a..
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