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1. Suppose the government regulates the prices of beef and chicken and sets them below their market clearing levels. Explain why shortages of these goods will develop and what factors will determine the sizes of the shortages. What will happen to the price of pork? Explain briefly.
2. In a discussion of tuition rates, a university official argues that the demand for admission is completely price inelastic. As evidence, she notes that while the university has doubled its tuition (in real terms) over the past 15 years, neither the number nor quality of students applying has decreased. Would you accept this argument? Explain briefly.
(Hint: The official makes an assertion about the demand for admission, but does she actually observe a demand curve? What else could be going on?)
Assume that the consumption of schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 30 and Xn = 10. Reca..
Assume that the government decreases spending by one hundred billion dollar. What happens to aggregate demand and discuss the differences between fixed and variable taxes.
Explain the three types of goods: search goods, experience goods and credence goods. What type of advertising would firms likely use for each type of good and why?
A poor person who has an income of $1,000 receives $100 worth of food stamps. Draw the budget constraint if the food stamp recipient can sell these coupons on the black market for less than their face value.
Karen runs a print shop that makes posters for large companies. It is a very competitive business. What is her AFC per poster (not per thousand!) if she prints 1000 posters? 2000? 10,000?
Suppose that you have just read a review of the literature of the effect of beauty on earnings.
What does this decision by Wal-mart tell you regarding the price elasticity of the demand curve that it faces?
Suppose the price of widgets falls from $7 to $5 and consumption of widgets rises from 15 widgets a month to 25 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of widgets? Is it..
The current market price is $7.50. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should.
A customer quit her job and now runs her own business. Her business an accounting profit of $33,700 and an opportunity cost of $36,700. There is an economic loss of -$3,000. Factoring ceteris paribus what economic advice would you give her
Analyse the impact of an increase in the price of crops and a (proportionately smaller) decrease in the price of fuel on a low income person who spends most of her income on food (derived from crops).
If the demand for a good falls by less than the supply of the good rises, then equilibrium price will and equilibrium quantity will . Decision making "at the margin" means making a choice based on of a decision.
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