I True or false.（2points*10） 1. If Good 1 is on the horizontal axis and Good 2 is on the vertical axis‚ then an increase in the price of Good 1 will not change the horizontal intercept of the budget line. 2. Henrietta’s utility function is U(x1‚ x2) = x1x2. She has diminishing marginal rate of substitution between goods 1 and 2. 3. Other things being equal‚ a lump sum tax is at least as good for a consumer as a sales tax that collects the same revenue from him. 4. Sharon spends all of her income
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from washing it? 2. Residents of your city are charged a fixed weekly fee of $6 for garbage collection. They are allowed to put out as many cans as they wish. The average household disposes of three cans of garbage per week under this plan. Now suppose that your city changes to a “tag” system. Each can of refuse to be collected must have a tag affixed to it. The tags cost $2 each and are not reusable. What effect do you think the introduction of the tag system will have on the total quantity
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results obtained using the GDP deflator and the CPI. 3. Suppose that an economy’s production function is Cobb-Douglas with parameter α=0.3. a. Calculate the fractions of income that capital and labor receive. b. Suppose that immigration increases the labor force by 10 percent. What happens to total output (in percentage)? What happens to the real wage (in percentage)? Explain the results you obtain intuitively. c. Suppose the capital stock increases by 10%. Explain (you don’t have
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capital–output ratio is about 2.5. Suppose that the production function is Cobb–Douglas‚ so that the capital share in output is constant‚ and that the United States has been in a steady state. (For a discussion of the Cobb–Douglas production function‚ see Chapter 3.) a. What must the saving rate be in the initial steady state? [Hint: Use the steady-state relationship sγ = (δ + n + g)k.] b. What is the marginal product of capital in the initial steady state? c. Suppose that public policy raises the saving
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computations are not required (or desired) d) Suppose 90 users visit the site during a particular minute‚ use the normal approximation to estimate the probability that more than 25 of them click on an ad. e) If 900 users visited the site‚ would the probability that more than 250 of them click on an ad be higher or lower than the answer found in part (d)? Write a few sentences explaining your answer- computations are not required (or desired) 2. Suppose that‚ overall‚ 5% of all tax returns are audited
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1. Assume there is a well-defined geographic area of a city. The area is composed exclusively of apartments and is populated by low-income residents. The people who live in the area tend to stay in that area because (1) they cannot afford to live in other areas of the city‚ (2) they prefer to live with people of their own ethnic group‚ or (3) there is discrimination against them in other areas of the city. Rents paid are a very high percent of peoples’ incomes. (a) Would the demand for apartments in
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PROBLEM SET 3 Problems for Chapter 3 1. Suppose the consumption function in the U.S. is represented by the following equation: C = 200 + .5 YD‚ where YD = Y – T and T = 200. a. What is the level of consumption in this economy if YD = 0? Briefly explain how individuals “pay for” this consumption when YD = 0. b. Given the above parameters‚ calculate the level of consumption if Y = 1200. Suppose Y increases to 1300. What happens to the level of YD as Y increases to 1300 (i.e. calculate
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4.6 An attendant at a car wash is paid according to the number of cars that pass through. Suppose the probabilities are 1/12‚ 1/12‚ 1/4‚ 1/4‚ 1/6‚ and 1/6‚ respectively‚ that the attendant receives $7‚ $9‚ $11‚ $13‚ $15‚ or $17 between 4:00 P. M. and 5:00 P. M. on any sunny Friday. Find the attendant’s expected earnings for this particular period. 4.7 By investing in a particular stock‚ a person can make a profit in one year of $4000 with probability 0.3 or take a loss of $1000 with probability 0
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statement(s) following “Suppose you know that” is (are) true‚ even if the statements contradict what you know. Using that information‚ evaluate the conclusions offered. 1. Suppose you know that All Juan’s pencils are blue. All the pencils on the table are blue. Then would this be true? At least some of the pencils on the table are Juan’s. a. It must be true b. It cannot be true c. It may be true‚ but there is not enough information to be certain 2. Suppose you know that
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frontier to shift ________. The expansion of capital resources tends to cause the production possibility frontier to shift ________. outward; outward. Refer to the following diagram to answer questions #5‚ #6 and #7. [pic] 5. Suppose the economy is producing at point B. Which of the following statements would best explain this situation? Some of the economy’s factors of production are going unused. 6. If the above economy moves from point A to point D‚ the opportunity
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