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A college student has two options for meals:
eating at the dining hall for $6 per meal, or eating a Cup O’ Soup for $1.50 per meal. His weekly food budget is $60.
a. Draw the budget constraint showing the trade-off between dining hall meals and Cups O’ Soup. Assuming that he spends equal amounts on both goods, draw an indifference curve showing the optimum choice. Label the optimum as point A.
b. Suppose the price of a Cup O’ Soup now rises to $2. Using your diagram from part
(a), show the consequences of this change in price. Assume that our student now spends only 30 percent of his income on dining hall meals. Label the new optimum as point B.
c. What happened to the quantity of Cups O’ Soup consumed as a result of this price change? What does this result say about the income and substitution effects? Explain
d. Use points A and B to draw a demand curve for Cup O’ Soup. What is this type of good called?
(a) In a typical labor exchange, what does the UPF for that exchange represent (b) Why is the UPF downward sloping (c) What does the slope represent. Finally, to what points in the Edgeworth box for the labor exchange does the UPF correspond
Arrow now sells 100,000 silk shirts at $100 each. The material per shirt expense $40 and labor costs are $50 a shirt. The company has $1.2m. In fixed costs.
Use an appropriate diagram, demonstrate and describe briefly how a increase in minimum wage could result in higher employment in a monopolistic labor market.
Mr. and Mrs. Jones purchase a new car while they are living in New York. A year later, they move to Oklahoma. Shortly after the move, the brakes fail on the car, causing an accident in which Mrs. Jones is injured. The Joneses file a lawsuit in Okl..
Many automotive dealerships, such as BMW, sell low mileage late model used cars, with warranties on defects and repairs that offer more coverage for longer periods of time than the warranties on their brand new cars. Explain the rationale for this..
If all firms in perfect competition have the same average revenue and pay the same price for inputs such as labor and materials, why do they not all have the same profit What is a natural monopoly Why is government justified in regulating a natural..
consumer when the employee accepts the offer and when he or she does not. determine, using a diagram, how this shift in income will affect current consumption, future consumption and savings. distinguish between borrowers and lenders.
It has been estimated that an additional doctor could increase the daily output of the clinic by 25 patients, while an additional nurse would increase the number of patients served in a day by only 10. What is the marginal rate of substitution bet..
Soft selling occurs when a buyer is skeptical of the quality or usefulness of a product or service.Instead of asking for a price, offer to give them the product in exchange for 50% of their cost savings.
Consists of performing application oriented exercises wherein specific economic principles learned in this course are put to practical use.
Problem - Income Elasticity of Demand, Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5
Describe the relationship of the demand curve and total revenue curve, indicating which of the four types of market structures market power like this would occur (i.e., perfect competition, monopolistic competition, oligopoly, monopoly).
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