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Sarah spends all of her income on apples and pears. She thinks that apples and pears are perfect substitutes; one apple is just as good as one pear. Apples cost $4 a unit and pears cost $5 a unit. 3.1. If the price of apples decreases to $3 a unit, will Sarah buy more of them? What part of the change in consumption is due to the income effect and what part is due to the substitution effect? 3.2. If the prices of apples and pears are respectively pa = $4 and pp = $5 and if Sarah has $120 to spend, draw her budget line in blue ink. Draw the highest indifference curve that she can attain in red ink, and label the point that she chooses as A. 3.3. Now let the price of pears fall to $3 a unit, while the price of apples does not change. Draw her new budget line in black ink. Draw the highest indifference curve that she can now reach with red ink. Label the point she chooses now as B. 3.4. How much would Sarah's income have to be after the price of pears fell, so that she could just exactly afford her old commodity bundle A? 3.5. When the price of pears fell to $3, what part of the change in Sarah's demand was due to the income effect and what part was due to the substitution effect?
The production process requires labor and capital as inputs. Labor costs $6 per labor hour and capital costs $12 per machine hour.
Amy Jane, a new manager at C & D Grooming, has been asked to focus on the competitive environment of the organization. Illustrate which of these factors is among those Amy Jane should focus on.
He drove this car until 2003 when he bought a Honda Civic for $18,000. If the price index in 1969 was 36.7 and the price index in 2006 was 180, Illustrate what is the price of the Dodge Dart in 2006 dollars.
Firm manufactures bicycle component upgrade kits. Kits have a short-run average variable cost of $48 and are sold for $66 each. What is breakeven level of daily output for firm.
Viennese artist Gustav Klimt's Portrait of Adele Bloch- Bauer was sold in New York for $135 million. Illustrate using supply and demand curve.
As before pleasing the job, you admit a surprise offer from a competitor. Elucidate how much producer surplus have you earned, if you actually earn $2600 during the month.
it is estimated that the price elasticity of demand is -3.0. Is the firm charging the optimal price for the product. Demonstrate how you know.
What is this firms total cost function, average cost function, average variable cost function and marginal cost function.
What is the profit-maximizing rate of output for the firm?( b ) How much profit does the firm earn at that rate of output?
Consider a simultaneous-move auction in which 2 players simultaneously select bids, which must be in nonnegative integer multiples of one cent.
the monopoly will experience a loss the monopoly will earn a profit the monopoly will earn zero profit consumers will be worse off than they would be if the firm's profit maximization activities were unregulated
The Solow Growth Model. In 2010, Japan was a large open economy with perfect capital mobility that was at its steady state.
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