Homework Answers
The production possibility curve (PPC) shows all the combinations of two goods (here wheat and corn) which can be produced in an economy with the given amount of resources. It is also called producion possibiliy frontier (PPF) and it represents tradeoff between the two goods. A point on the PPC are efficient bundles, points in the interior of the PPC are inefficient bundles, and points beyond the PPC are unattainable bundles.
For PPC 1, only bundle A is efficient and the bundles B, C and D are all beyound PPC 1, so they are unattainable. For PPC 2, bundles A and B are in the interior of the PPC, so they are ineffcient. Bundle C lies on the PPC 2, so it is efficient. Bundle D lies beyond PPC 2, so it is unattainable.
So, for feasible curve 1, we will choose bundle A and for feasible curve 2, we will chosose bundle C.
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18. For feasible curve 1, which bundle will be chosen? For feasible curve 2, which bundle...
1) A) Use a budget line and Indifference curve to show an initial optimal consumption bundle...
1) A) Use a budget line and Indifference curve to show an initial optimal consumption bundle of onions and peppers. Assume onions are normal goods and peppers are inferior goods. Next suppose the price of peppers increases. Graphically Illustrate and explain the income and substitution effects. B) Using the two prices and two quantities of peppers from the previous part of this problem, construct a demand curve. Explain where your numbers are coming from. Also show the income and substitution...
Question 18 1 pts An optimal bundle cannot lie on the interior of the opportunity set...
Question 18 1 pts An optimal bundle cannot lie on the interior of the opportunity set (i.e., inside the budget line) due to this assumption about preferences: transitivity monotonicity oooo completeness convexity
Given the following 2 constraints, which solution is a feasible solution for a maximization problem? (1) ...
Given the following 2 constraints, which solution is a feasible solution for a maximization problem? (1) 14x1 + 6x2 ≤ 42 (2) x1 – x2 ≤ 3 Group of answer choices a. (x1, x2 ) = (2,1) b. (x1, x2 ) = (1,5) c. (x1, x2 ) = (5,1) d. (x1, x2 ) = (4,4) e. (x1, x2 ) = (2,6)
Problem 2 1. Bob consumes two types of goods. He thinks that a consumption bundle (xı, x2) is at least as good as a bun...
Problem 2 1. Bob consumes two types of goods. He thinks that a consumption bundle (xı, x2) is at least as good as a bundle (yı, y2) if and only if x1 2 y and x2 2 y2. Are his weak preferences complete? Reflexive? Transitive? 2. Randy hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an indifference curve for Randy where...
Every week, Dave buys coffee and donuts to sustain his late night study habits. Suppose bundle “A...
Every week, Dave buys coffee and donuts to sustain his late night study habits. Suppose bundle “A” consists of 20 donuts and 10 cups of coffee. Using the concept of marginal rate of substitution, answer the following questions (assume donuts are on the horizontal axis): a. Suppose the slope of Dave’s Indifference curve through the bundle “A” is –2. Consider bundle “B” which consists of 19 donuts and 11 coffees. Does Dave prefer A to B, B to A, or...
a) home's demand curve for wheat is: D=100 - 20P its supply curve is: S= 20...
a) home's demand curve for wheat is: D=100 - 20P its supply curve is: S= 20 + 20P. Derive and graph Home's import demand schedule. what would the price of wheat be in the absence of trade? b) Now add Foreign, which has a demand curve D* = 80 - 20P, and a supply curve S* = 40 + 20P. i) Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in...
1. Suppose a consumer is maximizing utility consuming a bundle apples and bananas x and has...
1. Suppose a consumer is maximizing utility consuming a bundle apples and bananas x and has standard preferences. Her budget constraint is given by the equation 1000-2a-2b0. Apples are normal goods and bananas are normal. a) plot the optimal bundle, showing the proper indifference curve and budget constraint. Call this bundle x1 b) show the effect of an increase of a single price increase for apples on the budget constraint. Use a hypothetical budget line to identify substitution effects for...
Consider the production function y= x^(1/2). However, assume that, for political reasons, it is not feasible...
Consider the production function y= x^(1/2). However, assume that, for political reasons, it is not feasible to hire fewer then one unit of input. Thus, assume x>= 1. (a) Show that the inverse production function x(y) is convex. (b) The price of y is p= 10. Find the firm's marginal product MP(x) and average product AP(x). (c) Find the firm's value of marginal product VMP(x) and value of average product VAP(x). (d) Find the firm's input demand curve x*(w). (e)...
1. (18 points) For each of the following situations, i) Find the Marginal Rate of Substitution...
1. (18 points) For each of the following situations, i) Find the Marginal Rate of Substitution at the given bundle, and ii) use a graph to indicate the given bundle, and accurately draw the indifference curve that goes through that bundle. Be sure to label you graph carefully and accurately. In all cases put the amount of good X on the horizontal axis, and the amount of good Y on the vertical axis. a) The consumers utility function is given...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an income m. 1. 2. For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an endowment (el, e2) of the two goods. For each of your answers in question 2, write down the consumer...
1) A) Use a budget line and Indifference curve to show an initial optimal consumption bundle of onions and peppers. Assume onions are normal goods and peppers are inferior goods. Next suppose the price of peppers increases. Graphically Illustrate and explain the income and substitution effects. B) Using the two prices and two quantities of peppers from the previous part of this problem, construct a demand curve. Explain where your numbers are coming from. Also show the income and substitution...
Question 18 1 pts An optimal bundle cannot lie on the interior of the opportunity set (i.e., inside the budget line) due to this assumption about preferences: transitivity monotonicity oooo completeness convexity
Problem 2 1. Bob consumes two types of goods. He thinks that a consumption bundle (xı, x2) is at least as good as a bundle (yı, y2) if and only if x1 2 y and x2 2 y2. Are his weak preferences complete? Reflexive? Transitive? 2. Randy hates studying both economics and history. The more time he spends studying either subject, the less happy he is. But Randy has strictly convex preferences. (a) Sketch an indifference curve for Randy where...
1. Suppose a consumer is maximizing utility consuming a bundle apples and bananas x and has standard preferences. Her budget constraint is given by the equation 1000-2a-2b0. Apples are normal goods and bananas are normal. a) plot the optimal bundle, showing the proper indifference curve and budget constraint. Call this bundle x1 b) show the effect of an increase of a single price increase for apples on the budget constraint. Use a hypothetical budget line to identify substitution effects for...
1. (18 points) For each of the following situations, i) Find the Marginal Rate of Substitution at the given bundle, and ii) use a graph to indicate the given bundle, and accurately draw the indifference curve that goes through that bundle. Be sure to label you graph carefully and accurately. In all cases put the amount of good X on the horizontal axis, and the amount of good Y on the vertical axis. a) The consumers utility function is given...
h. U(1, 2 For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an income m. 1. 2. For the utility function above, find the consumer's optimal consumption bundle when prices of goods 1 and 2 are pl and p2, and the consumer has an endowment (el, e2) of the two goods. For each of your answers in question 2, write down the consumer...
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