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Suppose a person has $8 to spend only on apples and bananas. Apples cost $.04 each and bananas cost $.01 each. Furthermore, his preferences for apples (A) and bananas (B) can be represented by U = the square root of AB.
a) If A =5 and B=80, what will utitly be?
b) If A =10, what value of B will provide the same uititly in part a?
c) If A=20, what value of B will provide the same utility in parts a and b?
d) Graph the indifference curve implied by parts a through c.
e) Give the budget constraint, which of the points identified in parts a through c can be bought by this person?
f) show through some examples that every other way of allocating income provides less utility than does the point identified in partb. Graph this utility maximizing situation.
A firm is currently producing 80 units of output. At this level of output produced, P=150 and ATC=120. Also assume that MC=130 and MR is constant at all output levels and equal to 150. Is this firm making profits? If so, what are these profits? Is th..
The natural environment poses a problem for economic theory. Even if we accept, for the sake of argument, that the free market serves employer and employee, buyer and seller, equally, the environment may be harmed by market transactions.
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Enterprises recently paid a dividend, D0, of $1.50. It expects to have nonconstant growth of 19% for 2 years followed by a constant rate of 8% thereafter. The firm's required return is 12%. What is the firm's intrinsic value today, P0? What is the fi..
How do externalities in the production of electricity result in market failure?
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The demand curve for a good is horizontal when it is:
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