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A consumer cares only about the total amount of beer he drinks. Therefore he considers two 12 ounce cans of beer to be as good as one 24 ounce bottle. Suppose these are the only two goods available to this consumer. The price of a 12 ounce can is $1.00, while the price of a 24 ounce bottle is $3.00 due to higher packaging costs.
a) Write down his budget constraint and a utility function that captures his preferences. Draw his budget constraint and three of his indifference curves.
b) What is his optimal consumption bundle? Explain your reasoning.
c) Fixing the price of a 24 ounce beer at $3.00, what must we make the price of a 12 ounce beer to have the consumer purchase both goods?
d) At the price you determine in c) what is the best choice? Explain.
Create another diagram; once again start from an initial macroeconomic equilibrium. Explain both the SR and LR impact of a contractionary AS shock on Y. Use the appropriate diagrams and provide a brief real world example of this type of shock.
hat is your expected utility without insurance? Suppose you can buy insurance that will cover the medical expenses but not the foregone part of your salary. How much is an actuarially fair policy, and what is your expected utility if you buy it?
Assume that the nominal wage rate equals 60. In the short-run, aggregate demand and aggregate supply are equal at a price level of 1.0.
Make a table and graph of Crusoe's production function. Find out the Marginal product of labor for Crusoe at different quantities of labor.
Explain how the aggregate expenditure function shifts in response to the changes in each of the following variables:
The questions posed are broad and open ended so be careful to allow yourself enough research and planning time.
Problem on standard deviation
This product, called Red Hat Linux, is a potential replacement for UNIX and other well-known operating systems. If you were in charge of pricing at Red Hat, what strategy would you pursue? Explain.
Provide an update on the economy-where is unemployment, what is the outlook for the deficit, what are the overall predictions for 2010 - 2012?
Evaluate the range of marginal revenues
Consolidated Drugs, Inc. has spent $4 million developing and testing a new anti-aging drug. Management now estimates that it will cost $2 million to produce and market this new product.
In 1991, Brazil and Columbia united to form a coffee cartel and reduce coffee output. Suppose total costs for the cartel are:
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