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Question: 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?)
Some firms with monopoly power are more focused on market share, size and influence in the economy. This is particularly true if there is a tendency for ownership (stockholders) and control (managers) to be separated. These firms sometimes are willin..
A computer software company sells three products to three groups of buyers. Find the revenue-maximizing bundle
Determine the nature of the technological change, and explain how the change either increased outputs (positive technological change) or decreased outputs (negative technological change).
Ryan expects to deposit $1,000 now, $3,000 four years from now, and $1,500 six years from now in an account that is earning 12% per year compounded semi annually through a company-sponsored saving plan. What amount can he withdraw ten years from now?
The Rocky Mashed Potato factory produces output at costs C=Q2 (marginal cists 2Q), where Q is the quantity of mashed potatoes produced, in tons. In addition, 2 units of emissions are produced for each ton of mashed potatoes (E=2Q). Polluting damage i..
Four assets have the following expected returns: A = 15%; B = 12%; C = 30%, and D = 22%. Calculate the expected returns for a portfolio under the following conditions: Portfolio consists of each asset equally weighted
What determines the slope of the per-worker production function How do "rules of the game" affect productivity and growth What types of "rules" should a government set to encourage growth
The second firm finds that although demand is not perfectly elastic, it is now relatively more elastic. what will happen to the second firms marginal revenue curve and to its profit-maximizing price. competes with a second firm which had been a mon..
Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant.
1. how much would you pay for a perpetual bond that pays an annual coupon of 80 per year and yields on competing
We saw that real shocks and AD shocks often occur simultaneously. When this happens, unless we know the exact size of each shock.
Include three (3) external peer-reviewed sources to support your position. Explain the components of aggregate expenditure as elements in developing a theory.
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