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Question;1. In the below figure, a consumer is initially in;equilibrium at point C. The consumer?s income is $300, and the budget line;through point C is given by $300 = $100X + $150Y. When the;consumer is given a $200 gift certificate that is good only at store X, she;moves to a new equilibrium at point D.;Created;with Rapha?l 2.1.0;Product;Y;Product;X;A;B;C;D;E;F;I;2;I;1;a.;Determine the prices of goods X and Y.;Price of X;$;Price of Y;$;b. How many;units of product Y could be purchased at point A?;c. How many;units of product X could be purchased at point E?;d. How many;units of product X could be purchased at point B?;e. How many;units of product X could be purchased at point F?;f. Based on;this consumer?s preferences, rank bundles A, B, C, and D;in order from most preferred to least preferred.;(Click;to select)A, B, C, DD, B, C, AD, C, A, BC, A, B, D;g. Is;product X a normal or an inferior good?;(Click;to select)NormalInferior;2.A consumer?s budget set for two goods;(X and Y) is 1,000? 5X + 10Y.;a. The;budget set is illustrated below. What are the values of A and B?;Good;Y;Good;X;A;B;A =;B =;b. Does the;budget set change if the prices of both goods double and the consumer?s income;also doubles?;Yes;it shifts in toward the origin.;Yes;it rotates clockwise.;Yes;it shifts out from the origin.;No;it does not change.;c. Given;the equation for the budget set, what are the prices of the two goods?;Good X: $;Good Y: $;What is the;consumer?s income?;3. A worker views;leisure and income as ?goods? and has an opportunity to work at an hourly wage;of $10 per hour.;a. The worker?s;opportunity set in a given 24-hour period is illustrated below. What are;the values of A and B?;Income;Leisure;A;B;A =B = b. Suppose the worker is always willing to;give up $14 dollars of income for each hour of leisure. Do her preferences;exhibit a diminishing marginal rate of substitution? How many hours per day will she choose to work?;B =;b. Suppose;the worker is always willing to give up $14 dollars of income for each hour of;leisure. Do her preferences exhibit a diminishing marginal rate of;substitution?;Yes;or No?;How many;hours per day will she choose to work?;4. Suppose that the owner of Boyer Construction is feeling;the pinch of increased premiums associated with workers? compensation and has;decided to cut the wages of its two employees (Albert and Sid) from $23 per;hour to $20 per hour. Assume that Albert and Sid view income and leisure as;?goods,? that both experience a diminishing rate of marginal substitution;between income and leisure, and that the workers have the same before- and;after-tax budget constraints at each wage. Albert and Sid's opportunity set is;presented below;0;5;10;15;20;25;30;Albert;and Sid's Opportunity Set;Income;Leisure;Hours;A;What is the;value of A when the wage is $23?;What is the;value of A when the wage is $20?;At the wage;of $23 per hour, both Albert and Sid are observed to consume 12 hours of;leisure (and equivalently supply 12 hours of labor). After wages were cut to;$20, Albert consumes 10 hours of leisure and Sid consumes 15 hours of leisure.;Determine the number of hours of labor each worker supplies at a wage of $20;per hour;Albert's;supply of labor =;Sid's;supply of labor =;How can you;explain the seemingly contradictory result that the workers supply a different;number of labor hours?;Albert's;substitution effect dominates his income effect when the wage declines to;$20, and vice versa for Sid.;Albert's;income effect dominates his substitution effect when the wage declines to;$20, and vice versa for Sid.;Albert;has no substitution effect, and Sid has no income effect when the wage;declines to $20.;Albert;has no income effect, and Sid has no substitution effect when the wage;declines to $20.;5. A large Coca Cola vendor recently hired some economic;analysts to assess the effect of a price increase in its 16 ounce bottles from;$1.00 to $1.50. The analysts determined that, on average, the vendor?s;customers spend about $17.00 on soda (Coke and all other brands) each week, and;the average price for other 16-ounce soda bottles is $1.00. The analysts;also utilized some focus groups to determine the preferences of the vendor?s;customers. They used this analysis to build the following graph;Created;with Rapha?l 2.1.0;Bottles;of Other Soda;Bottles;of Coke;X;1;X;0;Budget;Line beforePrice Increase;Budget;Line afterPrice Increase;Suppose X0 = 9 and X1 = 6. Should the vendor expect to;sell 6, more than 6, or less than 6 bottles of Coke after raising the price to;$1.50 if Coke is a normal good?;Choose One;The;vendor should expect to sell 6 bottles of Coke.;The;vendor should expect to sell more than 6 bottles of Coke.;The;vendor should expect to sell less than 6 bottles of Coke.;6. When trying to assess differences in her customers;Claire ? the owner of Claire?s Rose Boutique ? noticed a difference in the;typical demand of her female versus her male customers. In particular;she found her female customers to be more price sensitive in general.;After conducting some sales analysis, she determined that her female customers;have the following demand curve for roses: QF = 24 ? 2.50*P. Here, QF is the quantity of roses demanded by;a female customer, and P is the price charged per rose. She;determined that her male customers have the following demand curve for roses: QM = 28 ? 1.50*P. Here, QM is the quantity of roses demanded by;a male customer. If two unaffiliated customers walk into her boutique;one male and one female, determine the demand curve for these two customers;combined (i.e., what is their aggregate demand?). (Note: QT represents total, or aggregate;demand. Solve for the demand curve for prices less than $12.)??QT = - P;7. An economist;estimated that the cost function of a single-product firm is;C(Q);= 110 + 35Q + 30Q2;+ 5Q3.;Based on;this information, determine the following;a. The;fixed cost of producing 10 units of output.;$;b. The;variable cost of producing 10 units of output.;$;c. The;total cost of producing 10 units of output.;$;d. The;average fixed cost of producing 10 units of output.;$;e. The;average variable cost of producing 10 units of output.;$;f. The;average total cost of producing 10 units of output.;$;g. The;marginal cost when Q = 10.;$;8. A manager hires labor and rents capital equipment in a;very competitive market. Currently the wage rate is $15 per hour and capital is;rented at $8 per hour. If the marginal product of labor is 45 units of output;per hour and the marginal product of capital is 65 units of output per hour;should the firm increase, decrease, or leave unchanged the amount of;capital used in its production process?;Choose One;The;firm should leave capital unchanged.;The;firm should increase capital.;The;firm should decrease capital.;9. A firm produces output according to a production;function;Q = F(K,L) = min {9K,3L}.;a. How much;output is produced when K = 2 and L = 3?;b. If the;wage rate is $60 per hour and the rental rate on capital is $40 per hour, what;is the cost-minimizing input mix for producing 9 units of output?;Capital;Labor;c. How does;your answer to part b change if the wage rate decreases to $40 per hour but the;rental rate on capital remains at $20 per hour?;Choose One;It;does not change.;Capital;and labor increase.;Capital;increases and labor decreases.;Capital;decreases and labor increases.;10. You were recently;hired to replace the manager of the Roller Division at a major;conveyor-manufacturing firm, despite the manager?s strong external sales;record. Roller manufacturing is relatively simple, requiring only labor and a;machine that cuts and crimps rollers. As you begin reviewing the company?s;production information, you learn that labor is paid $8 per hour and the last;worker hired produced 90 rollers per hour. The company rents roller cutters and;crimping machines for $13 per hour, and the marginal product of capital is;110 rollers per hour.;Should you;change the mix of capital and labor, and if so, how should it change?;Choose One;You;should increase capital and decrease labor.;You;should increase labor and decrease capital.;You;should not change the mix of capital and labor.;11. The World of Videos operates a retail store that rents;movie videos. For each of the last 10 years, World of Videos has consistently;earned profits exceeding $37,000 per year. The store is located on prime real;estate in a college town. World of Videos pays $2,100 per month in rent for its;building, but it uses only 50 percent of the square footage rented for video;rental purposes. The other portion of rented space is essentially vacant.;Noticing that World of Videos only occupies a portion of the building, a real;estate agent told the owner of World of Videos that she could add $1,650 per;month to her firm?s profits by renting out the unused portion of the store.;While the prospect of adding an additional $1,650 to World of Videos?s bottom;line was enticing, the owner was also contemplating using the additional space;to rent video games. What is the opportunity cost of using the unused portion;of the building for video game rentals?;$;12. According to The Wall Street Journal, Mitsubishi;Motors recently announced a major restructuring plan in an attempt to reverse;declining global sales. Suppose that as part of the restructuring plan;Mitsubishi conducts an analysis of how labor and capital are used in its;production process. Prior to restructuring Mitsubishi?s marginal rate of;technical substitution is 0.16 (in absolute value). To hire workers, suppose;that Mitsubishi must pay the competitive hourly wage of ?1,740. In the study of;its production process and markets where capital is procured, suppose that Mitsubishi;determines that its marginal productivity of capital is 0.8 small cars per hour;at its new targeted level of output and that capital is procured in a highly;competitive market. The same study indicates that the average selling price of;Mitsubishi?s smallest car is ?1,400,000. Determine the rate at which Mitsubishi;can rent capital and the marginal productivity of labor at its new targeted;level of output.;Instruction: Round your answer for marginal productivity of labor to 4;decimal places.;Rental rate;of capital: ?;Marginal;productivity of labor;To minimize;costs Mitsubishi should hire capital and labor until the marginal rate of;technical substitution reaches what proportion?;Instruction: Round your answer to 4 decimal places.

Paper#56396 | Written in 18-Jul-2015

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