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Income and Substitution Effects. Sabrina works for a workers cooperative that initially pays her a lump sum of $200 per week (as long as she works at least 15 hours per week) and a wage of $20 per hour of work. She initially works 40 hours per week. Suppose the cooperative changes its pay plan by increasing the lump-sum payment to $280 and decreasing the hourly wage to $18.
a. If Sabrina continues to work 40 hours per week, how does the change in the pay plan affect her total income?
b. Use the concepts of the income and substitution effects to predict whether Sabrina will work more hours, fewer hours, or the same number of hours. (Hint: Is there an income effect to consider?)
A stock was priced at $150 per share at the end of 2007. The following table shows dividends per share paid during each year and the price of the stock at the end of the year for the following four years: 2008, 2009, 2010, 2011 and the Dividends P..
Suppose a firm operates as a price taker in a perfectly competitive industry. The firm's TC function is given by TC = 10 +4Q +2Q2, so its Marginal Cost is MC = 4 +4Q. If the market price is P = $100, what is the maximum amount of profit
Assume that an entrepreneur's short-run total cost function is C=(q^3)- (10q^3)+17q+66. Determine the output level at which he maximizes profit if p=5. Compute for the output elasticity of cost at this output.
What is the efficient market theory? What implications does it have for whether you can beat the market? Does it imply that all stocks must yield the same expected return?
If the price of Good A increases by 50% from its original price which indifference curve will this consumer end up on Will the consumer be buying more of Good Y, more of Good X, or more of both goods.At the point of consumer equilibrium what is the..
Suppose the demand function for a firm's product is given by In Qdx=3-0.5 In Px-2.5 In Py In M 2 In A Where Px= $10, Py= $4, M= $20,000, A= $250 A. Determine the own price elasticity of demand, and state whether demand is elastic, inelastic, or unita..
What single amount on april 1 2012 is equivalent to a series of equal, semiannual cash flows of $1000 that starts with a cash flow on january 1, 2010 and ends with a cash flow on January 1, 2019
Will revenues increase or decrease in the short and long runs?
A current asset (defender) is being evaluated for potential replacement. It was purchased four years ago at a cost of $62,000. It has been depreciated as a MACRS (GDS) five-year property- class asset. The present MV of the defender is $12,000.
Suppose banks are required by law to hold 5% of their deposits in reserves and total deposits are $100 million, but banks choose to hold a total of 20% of their deposits in reserves because loans are riskier and potentially unprofitable. Calculate..
Why might this legislation increase aggregate surplus? Why might it lower it?
Southwest Airlines (SWA) is planning to expand its fleet of jets to replace some old planes and to expand its routes. It has received a proposal from Boeing to purchase some old planes and to expand its router.
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