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The textbook claims that when people do not have to pay anything to use valuable resources, such as urban roadway space, they will continue using them until their value diminishes to zero. That often strikes people who have not yet become thoroughly familiar with the marginal way of thinking as wrong. Why would people choose to act in a way that caused the value of an activity - the value to themselves - to become zero? Their confusion arises from failure to realize that it marginal value that diminishes to zero and that it is very different from total or average value. Suppose you love chocolate chip cookies. It's 10 o'clock in the morning, you're quite hungry, and someone comes by selling freshly baked chocolate chip cookies. You peer into your psyche and discover your demand for chocolate chip cookies. You won't pay more than $3 for a cookie, and you don't want to eat more than four under any circumstances. (We rule out the possibility of storing them for eating later.) Here is your demand schedule:
Price CookiesDemanded per Day
$3.00 11.50 20.40 30.10 40.00 4
a. How many cookies will you eat per day if the price is zero?b. How much total value, measured in dollars per day, will you thereby obtain?c. What will be the average value of the cookies to you, measured in dollars per cookie?d. What will be the marginal value of cookies to you, measured in dollars per cookie, when they're free to you?
Explain how does each of the following affect the aggregate demand curve?
Graph the isoquant that these calculations imply. Explain in very clear and complete terms why the isoquant has the shape that you observe.
Construct a graph showing the outputs, and prices before and after the corrective taxes were imposed.
Draw a bowed-out production possibilities curve (PPC or PPF) with an aggregate measure of medical services, Q, on the horizontal axis and an aggregate measure of all other goods (and services), Z, on the vertical axis.
Suppose that rich countries surprisingly commit to much higher official aid, to be maintained for several decades. What would be the effect of such aid on?
Explain how does the economy effect the Airline Industry. What are economic influences that affect the industry in a negative way.
Elucidate effect would you expect an increase in the property tax rate to have on residential rents. Would you expect the effect to be different in the long run from what it is in the short run.
Derive an expression for the marginal utility of good 1, and for the marginal utility of good 2. Using these, solve for an expression describing the slope of an indifference curve: MRS(x1,x2).
In most developing countries, there are long lines of taxis at airports, and these taxis often wait two or three hours. Illustrate what does this tell you about the price in the market. Carefully Explain with supply and demand analysis.
Discuss the information-gathering techniques and design methods you would propose to use for the project.
Assume you fail to hedge, but the British ale seller decides to cut you a break and only pass through half of the pound appreciation.
What is the profit-maximizing price for this firm? On the graph show the area, which area represents the net loss to society resulting from the monopoly power conferred by the patent?
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