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Using neo-classical model of labor-leisure choice to answer the following questions. (You need to verify your answers using graphs and arguments.)
a. How does an increase in wage rate change the optimal consumption-leisure combination chosen by the worker? State income effect and substitution effect.
b. Suppose the government grants $1000 to women who are completely out of the labor force. If this eligible woman gets a job in labor market, government takes away 50 cents from the cash grant for every dollar earned by the woman. Wage rate in labor market is $10 per hour. How does this welfare program create work disincentives for women? (hint: compare optimal choice before and after the program being effective).
Assume that the central bank refuses to change the interest rate from 10%. In this case, illustrate what is the new level of output. What is the money supply.
The demand function for a good is given as Q = 10 – 2P, where Q = quantity demanded and P = the market price per unit of the good. The cost function is given as C = 8 + 0.5Q where C = total cost. If P = $3, how much profit is earned?
What are five challenges China’s economy faces as its leadership tries to change the source of growth from exports and public investment to consumption? Why might a slowdown in China’s economy not pose serious problems for the U.S. economy?
Consider the real intertemporal model with investment. What is the effect of an increase in delta, the depreciation rate, on the representative firm's investment decision, and on its optimal investment schedule? Explain your answer carefully using th..
It is relatively clear why price discrimination may be good for firms. But what about consumers? Do you think consumers benefit or are hurt when the firm is able to charge a different price to different customers?
While you were an intern you bought 5 packages of hot dogs a month. After acquiring a full-time job with a considerably higher salary, you stopped purchasing hot dogs. Explain this behavior. 7. An investor has to choose between stocks A&B, each selli..
A worker-managed firm is a firm managed by elected representatives of its employees. Such firms are believed to maximize profits per worker rather than total profits. Consider such a firm in the short run, when labour is the only variable input. Will..
Public health information can be broadcast at a cost of $100. Public health information is a pure public good, in that many people can use the information simultaneously and preventing people from using the information is very difficult. What are the..
A study estimates the cross-price elasticity between subscription satellite radio service and subscription Internet radio to be -2.5. Based on this information, we infer that the two services are
Suppose that a biotech firm in Pittsburgh raised $113 million in an IPO. The firm received $23 per share, and the stock sold to the public for $25 per share. The firm’s legal fees, SEC registration fees, and other out-of-pocket costs were $657,500. T..
A monopolist has total cost TC = 200 + .5 Q2. Marginal cost is Q and the market demand is Q = 100 - P/2. Draw a graph showing ATC, MgC, Demand, Mg Revenue and the optimal choice of the monopolist. What is consumer and producer surplus in this market?..
If this statement is true and why or why not. "Ronald Coase would suggest that taxing your roommate at the margin for playing music too loudly would result in the efficient allocation if the tax is set appropriately."
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