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Consider three agents with the respective utility functions: uA(x,y)= xy (MRS(x,y)= y) x uB (x, y) = x + y (perfect substitutes) uC (x, y) = min{x, y} (perfect complements) Assume each agent has income $120 and initially faces the prices px = $1 and py = $2. Then suppose the price of x were to increase to $4. Identify the substitution effect of the price change on each individual’s demand for x. (Hint 1: For agent A, what two properties determine the location of “z”, the reference point for distinguishing the income and substitution effects? Hint 2: For agents B and C, identify the substitution effect graphically.)
Assume that a monopolist has a demand curve given by P=1500-4Q, and TC= 100 + 5Q2 with MC=10Q. Calculate the dead weight loss. Calculate the consumer surplus and producer surplus.
Assumed that each of the subsequent rows represents the choice faced by policy makers given the current set of U.S. institutions also technology.
The demand for a new book is given by the function Q = 5,000 - 100p. If the cost of having the book edited and typeset is $20,000, if the marginal cost of printing an extra copy is $4, and if he has no other costs, then he would maximize his profits ..
Explain the difference between accounting profit and economic profit. Which should business owners be more concerned with and why? Provide an example that would illustrate how accounting profit and economic profit differ.
Assume that demand for a commodity is represented by the equation P = 10 – 0.2 Q d, and supply by the equation P = 2 + 0.2 Qs where Qd and Q s are quantity demanded and quantity supplied, respectively, and P is the Price. Use the equilibrium conditio..
Explain two elastic and inelastic goods that you have recently purchased/not purchased when the price increased of those products. Please relate your answer to the market characteristics.
What is the relationship between potential output and the natural rate of unemployment? a. If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent, and cycli..
Suppose a firm purchases labor in a competitive domestic labor market and sells its product in a competitive international product market that covers the whole world. Domestic producers represent a small portion of the world market and have no influe..
There are many brands of laundry detergent, all equally effective. Would you expect the elasticity of demand for any particular brand to be high or low? Explain.
q. suppose that low-skilled workers employed in clearing woodland can each clear one acre per month if they are each
Illustrate what implications would increasing worker protections have upon the ability of American companies to compete globally.
Gina has the choice of two bonds, one that pays 5 percent interest and the other that pays 10 percent interest. Which of the following is most likely?
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