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Consider an individual with the following utility function: U(r, y) = ln(r+ 1) + y. The marginal utility of r is 1/(1 + r); the marginal utility of y is 1. (a) Find the marginal rate of substitution of y for r. Is there anything unusual about the MRSyr? What does this imply about the indifference map? (b) What is the definition of compensating variation (CV)? (c) Find the CV for any level of r where the change is that r is banned. (d) Find the inverse demand curve for r. (e) On a graph show the change in consumer surplus for a ban on r assuming that the price of r is zero and initial consumption is r = 4. (f) For any r what is the change in consumer surplus from a ban, assuming that the price of r is zero? (g) Show that the change in consumer surplus in these circumstances equals the CV! (h) Find the CV for an individual with the following preferences if q is banned and the price of q is zero: U(q, y) = 2q ^1/2 + y
When a bank issues a loan, its liabilities and reserves increase by the amount of the loan" on the basis of the following assumptions:
Now suppose that nominal GDP in 2003 totals $8546 billion and rises to $13.1 trillion ten years later for the United States. The GDP deflator for 2003 is 1.85 and for 2013 is 2.75, in what year is real GDP greater? By how much? How did you arrive at ..
To increase his market share in the fast food market, Jim would like to increase sales of the firegut to 750 per week, what price should jim set?
illustrate what will be the effect of an excess of planned investment over saving in a private closed economy with unemployed resources.
Section II A firm uses steel and aluminum to produce auto parts. The current input mix used by the firm is such that the marginal product of aluminum is equal to 800 units, while the marginal product of steel is equal to 500 units. how this firm coul..
Suppose that 20 workers were required in 2010 to produce 20,000 bushels of wheat on a 1,000-acre farm. a. What is the average output per acre? bushels per acre. What is the average output per worker?
Consider the following static airline game. Two airlines, Delta and American Airlines, compete setting prices for the route Columbus-Chicago on Tuesdays at 7:20PM. There are 60 potential passengers with a reservation price of $500 and 120 additional ..
Do you think governments should step in and help an economy move to potential or are "markets" capable of fixing themselves? Carefully consider the impact of falling prices.
Explain how the method used to determine the profit- maximizing level of output in product markets (i.e., MR = MC) can be applied to the labor market to determine the most profitable number of employees a firm should hire. Can you restate the equatio..
Write an instructional guide of 1–2 pages that explains how to set up a festival booth. Be sure to offer a clear heading that summarizes the task, use numbered lists if and when necessary, and do not mix instructions with conceptual information. Your..
Suppose a country’s currency is a gold coin. One day, speculators find a large gold mine which doubles the supply of gold coins in the economy. In the short run:
A primary cause of inefficiency in government is that. According to the survey reported in the text, most people believe that health related goods and services should be allocated by the ___ allocation mechanism. An illegal drug dealer will maximize ..
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