Microeconomic Theory Basic Principles And Extensions 10th Edition Walter Nicholson, Christopher M. Snyder - Solutions

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2.6 Suppose that f(x,y) = xy. Find the maximum value for / if x and y are constrained to sum to 1. Solve this problem in two ways: by substitution and by using the Langrangian multiplier method.
2.5 Suppose U= (x,y) = 4x 2 + Sy'2.a. Calculate dU/dx, dU/dy.b. Evaluate these partial derivatives at x = 1, 3? = 2.c. Write the total differential for U.d. Calculate dy/ dx for dU = 0—that is, what is the implied trade-off between x and y hold ing U constant?e. Show U= 16 when x = 1, y = 2.f. In
2.4 Taxes in Oz are calculated according to the formula where Trepresents thousands of dollars of tax liability and /represents income measured in thousands of dollars. Using this formula, answer the following questions:a. How much tax do individuals with incomes of $10,000, $30,000, and $50,000
2.3 The height of a ball t seconds after it is thrown straight up is — Vigf + 40 £ (where gis the acceleration due to gravity).a. If g = 32 (as on the earth), when does the ball reach a maximum height? What is that height?b. If g= 5.5 (as on the moon), when does the ball reach a maximum height
2.1 For each of the following functions of one variable, determine all local maxima and minima and indicate points of inflection (where /" = 0):a. f(x) = 4x 3- 12xb. f(x) = Ax — x 2c. f(x) = x 5
Would the opportunity cost ofparking be the same for students with no outside employment and students with jobs earning $15 per hour?
Thinking in terms ofopportunity cost, would the lower price ofa parking permit necessarily lower the true cost of parking?
What do you think would happen to the amount of time it would take to fmd a parking place?
What do you think would happen to the number ofstud~nts desiring to park their cars on campus?
Suppose your university decides to lower the cost of parking on campus by reducing the price ofa parking permit from $200 per semester to $5 per semester.
20. Productivity can be increased by a.raising minimum wages.raising union wages.improving the education of workers.restricting trade with foreign countries.
19. Which of the following is not part ofthe opportunity cost of going on vacation?a.the money you could have made ifyou had stayed home and worked the money you spent on food the money you spent on airline tickets the money you spent on a Broadway show
18. Referring to question 17, your decision rule should be to complete the hot-dog stand as long as the cost to complete the stand is less than$100.$300.$500.$800.none ofthe above.
17. You have spent $1,000 building a hot-dog stand based on estimates ofsales of$2,000.~·The hot-dog stand is nearly completed, but now you estimate total sales to be only$800.You can complete the hot-dog stand for another $300. Should you complete the hot-dog stand? (Assume that the hot dogs cost
16. An increase in the price ofbeefprovides a.information that tell~ consumers to buy more beef.information that tells consumers to buy less pork.information that tells producers to produce more beef.no information because prices in a market system are managed by planning boards.
15. In the short run, a.an increase in inflation temporarily increases unemployment.a decrease in inflation temporarily increases unemployment.inflation and unemployment are unrelated.the business cycle has been eliminated.None ofthe above is true.
14. High and persistent inflation is caused by unions increasing wages too much.OPEC raising the price of oil too much.governments increasing the quantity ofmoney too much.regulations raising the cost ofproduction too much.
13. Workers in the United States enjoy a high standard ofliving because unions in the United States keep the \vage high.we have protected our industry from foreign competition.the United States has a high minimum wage.workers in the United States are highly productive.None ofthe above is true.
Which of the following statements is true about a market economy?Market participants act as if guided by an "invisible hand" to produce outcomes that promote general economic well-being.Taxes help prices communicate costs and benefits to producers and consumers.With a large enough computer~ central
9.students will shift majors from accounting to education.fewer students will attend college.None of the above is true.Which of the following activities is most likely to produce an externality?A student sits at home and watches television.A student has a party in her dorm room.A student reads a
8.allows a country to avoid trade-offs.makes the members of a country more equal.increase'S the scarcity ofresources.is none of the above.Because people respond to incentives, we would expect that if the average salary of accountants increases by 50 percent while the average salary ofteachers
7.. nothing, because you found the money.$20 (because you could have used the $20 to buy other things).$20 (because you could have used the $20 to buy other things) plus the value of your time spent at the game.$20 (because you could have used the $20 to buy other things) plus the value~fyour time
6.Suppose you fmd $20. Ifyou choose to use the $20 to go to the football game, your opportunity cost of going to the game is
5.the action is ethical.the action produces marginal costs that exceed marginal benefits.the action produces marginal benefits that exceed marginal costs.None of the above is true.Raising taxes and increasing welfare payments proves that there is such a thing as a free lunch.reduces market
4.society manages its scarce resources.to reduce our wants until we are satisfied.to avoid having to make trade~offs.society manages its unlimited resources.A rational person does not act unless the action makes money for the person.
3.economicaL scarce.unlimited.marginal.Economics is the study of how to fully satisfy our unlimited wants.
'2.buying a new car going to college watching a football game on Saturday afternoon taking a nap All of the above involve trade-offs.efficient.Trade-olfs are required because wants are unlimited and resources are
Workers in the United States have a relatively high standard ofliving because the United States has a relatively high minimum wage.Which of the following involve a trade-off?
An individual farmer is likely to have market power in the market for wheat.Tb a student, the opportunity cost ofgoing to a basketball game would include the price of the ticket and the value ofthe time that could have been spent studying.
1.An auto manufacturer should continue to produce additional autos as long as the firm is profitable, even ifthe cost of the additional units exceeds the price received.
Workers in the United States have a relatively high standard ofliving because the United States has a relatively high minimum wage.
Tb a student, the opportunity cost ofgoing to a basketball game would include the price of the ticket and the value ofthe time that could have been spent studying.
An individual farmer is likely to have market power in the market for wheat.
An auto manufacturer should continue to produce additional autos as long as the firm is profitable, even ifthe cost of the additional units exceeds the price received.
In the short run, a reduction in inflation tends to cause a reduction in unemployment.
High and persistent inflation is caused by excessive growth in the quantity of money in the economy.
Sue is better at cleaning, and Bob is better at cooking. It will take fewer hours to eat and clean ifBob specializes in cooking and Sue specializes in cleaning than if they share the household duties evenly.
An unintended consequence of public support for higher education is that low tuition provides an incentive for many people to attend state universities even ifthey have no desire to learn anything.
A tax on liquor raises the price ofliquor and provides an incentive for consumers to drink more.
When a jet flies overhead, the noise it generates is an externality.
The United States will benefit economically ifwe eliminate trade with Asian countries because we will be forced to produce more of our own cars and clothes.
Rational people act only when the marginal benefit of the action exceeds the marginal cost.
Adam Smith's "invisible hand" concept describes how corporate business reaches into the pockets of consumers like an ".invisible hand."
When economists say, "There ain't no such thing as a free lunch;' they mean that aU economic decisions involve trade-offs.
When the government redistributes income with taxes and welfare, the economy becomes more efficient.
12. Who is more self-interested, the buyer or the seller?
11.A goal for a society is to distribute resources more equally and fairly. How might you distribute resources ifeveryone were equally talented and worked equally hard? What ifpeople had different talents and some people worked hard, while others did not?
Ifthe government printed twice as much money, what do you think would happen to prices and output if the economy were already producing at maximum capacity?
Ifwe save more and use it to build more physical capital, productivity will rise and we will have rising standards ofliving in the future. What is the opportunity cost of[uture growth?
In the ~Vealth ifNations, Adam Smith said, "It is not from the benevolence ofthe butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."What do you think he meant?
Suppose one country is better at producing agricultural products (because they have land that is more fertile), while another country is better at producing manufactured goods (because they lJave a better educational system and more engineers). If each country produced their specialty and traded,
Why do you think air bags have reduced deaths from auto crashes less than we had hoped?
YQur car needs to be repaired.You have already paid $500 to have the transmission fixed, but it still doesn't work properly. You can sell your car "as is" for $2,000. Ifyour car were fixed, you could sell'it for $2,500.Your car can be fixed with a guarantee for another $300, Should you repair your
glass ofwater greater or lesser than an additional one-carat diamond? Why?
Water is necessary for life. Diamonds are not. Is the marginal benefit of an additional
Why is there a trade-off between equality and efficiency?
What is the opportunity cost ofsa'ling some ofyour paycheck?
1.Is air scarce? Is clean air scarce?
2.Opportunity cost is what you give up to get an item. Because there is no such thing as a free lunch, what would likely be given up to obtain each ofthe items listed below?Susan can work full time or go to college. She chooses college.Susan can work full time or go to college. She chooses
1.People respond to incentives. Governments can alter ince!1tives and, hence, be havior with public policy. However, sometimes public policy generates unintended consequences by producing results that were not anticipated. For each ofthe following public policies, determine which result was likely
Give an example of an externality
EX"plai~ why specialization and trade improve people's choices
Explain the classic trade-off between "guns and butter"Add up your particular opportunity cost ofattending college
19.12 Probabilistic voting Probabilistic voting is a way of modeling the voting process that introduces continuity into individuals' voting decisions. In this way, calculus-type derivations become possible. To take an especially simple form of this approach, suppose there are # voters and two
19.11 Public choice of unemployment benefits Suppose individuals face a probability of that they will be unemployed next year. If they are unemployed they will receive unemployment benefits ofb, whereas if they are employed they receive (1), where is the tax used to finance unemployment benefits.
19.10 Vote trading Suppose there are three individuals in society trying to rank three social states (A, B, and C). For each of the methods of social choice indicated, develop an example to show how the resulting social ranking of A, B, and C will be intransitive (as in the Paradox of voting) or
. Suppose that, instead of taxing output, the Pigovian tax is applied to each unit of pollution. How should this tax be set? Will the tax yield the efficient allocation described in part (a)?d. What are the implications of the problem for adopting pollution control strategies? (For more on this
19.9 Taxing pollution Suppose that there are n firms each producing the same good but with differing production functions. Output for each of these firms depends only on labor input, so the functions take the form q;= f(4). In its production activities each firm also produces some pollution, the
19.8 More on Lindahl equilibrium The analysis of public goods in Chapter 19 exclusively used a model with only two individuals. The results are readily generalized to persons-a generalization pursued in this problem.a. With #persons in an economy, what is the condition for efficient production of a
Suppose the production possibility frontier for an economy that produces one public good (y) and one private good (x) is given by x + 100y = 5,000. This economy is populated by 100 identical individuals, each with a utility function of the form utility = xy, where x, is the individual's share of
19.7a. Suppose mosquito control is a pure public good; that is, once it is produced, everyone benefits from it. What would be the optimal level of this activity if it could be produced at a constant marginal cost of $120 per unit?b. If mosquito control were left to the private market, how much
19.6 Suppose there are only two individuals in society. Person A's demand curve for mosquito control is given by 9-100-p; for person B, the demand curve for mosquito control is given by %-200-p.
19.4 There is considerable legal controversy about product safety. Two extreme positions might be termed caveat emptor (let the buyer beware) and caveat vendor (let the seller beware). Under the former scheme producers would have no responsibility for the safety of their products: buyers would
Suppose the oil industry in Utopia is perfectly competitive and that all firms draw oil from a single (and practically inexhaustible) pool. Assume that each competitor believes that it can sell all the oil it can produce at a stable world price of $10 per barrel and that the cost of operating a
19.3 What number should be allowed to fish on Lake x in order to maximize the total catch of fish? What is the number of fish caught in this situation?c. Being opposed to coercion, the chief decides to require a fishing license for Lake x. If the licensing procedure is to bring about the optimal
On the island of Pago Pago there are 2 lakes and 20 anglers. Each angler can fish on either lake and keep the average catch on his particular lake. On Lake x, the total number of fish caught is given by F* = 10% - 1, where, is the number of people fishing on the lake. For Lake y, the relationship
19.2a. If the market price is $20 per widget and the firm's marginal cost is given by MC 0.44, where q is the daily widget production for the firm, how many widgets will the firm produce?b. Suppose a government study has found that the firm's new process is polluting the air and estimates the
19.1 A firm in a perfectly competitive industry has patented a new process for making widgets. The new process lowers the firm's average cost, meaning that this firm alone (although still a price taker) can earn real economic profits in the long run.
18.12 Team effort Increasing the size of a team that creates a joint product may duil illustrate. Suppose partners together produce a revenue of R effort, which costs him e(e)/2 to exert. incentives, as this problem will ++; heree, is partner i'sa. Compute the equilibrium effort and surplus
18.11 Increasing competition in an auction A painting is auctioned to distributed between 0 and 1. bidders, each with a private value for the painting that is uniformlya. Compute the equilibrium bidding strategy in a first-price sealed-bid auction. Compute the seller's expected revenue in this
18.10 Diagrams with three types Suppose the agent can be one of three types rather than just two as in the chapter.a. Return to the monopolist's problem of computing the optimal nonlinear price. Represent the first best in a schematic diagram by modifying Figure 18.5. Do the same for the second
18.9 Doctor-patient relationship Consider the principal-agent relationship between a patient and doctor. Suppose that the patient's utility function is given by Up(m,x), where m denotes medical care (whose quantity is determined by the doctor) and x denotes other consumption goods. The patient
18.8a. Compute a buyer's maximum willingness to pay for a car if he or she cannot observe the car's quality.b. Suppose that there are enough buyers relative to sellers that competition among them leads cars to be sold at their maximum willingness to pay. What would the market equilibrium be if
18.7a. Assume insurance companies cannot distinguish lefties from righties and so offer a single con- tract. If both types are equally likely to buy insurance, what would be the actuarially fair premium for full insurance?b. Which types will buy insurance at the premium calculated in (a)?c. Given
18.6 Consider the same setup as in Problem 18.5, but assume that insurance is offered by competitive insurers.
18.5 Suppose that left-handed people are more prone to injury than right-handed people. Lefties have an 80 percent chance of suffering an injury leading to a $1,000 loss (in terms of medical expenses and the monetary equivalent of pain and suffering) but righties have only a 20 percent chance of
18.4 Suppose there is a 50-50 chance that an individual with logarithmic utility from wealth and with a current wealth of $20,000 will suffer a loss of $10,000 from a car accident. Insurance is competitively provided at actuarily fair rates.a. Compute the outcome if the individual buys full
18.3 Return to the nonlinear pricing problem facing the monopoly coffee shop in Example 18.4, but now suppose the proportion of high demanders increases to 2/3 and the proportion of low demanders falls to 1/3. What is the optimal menu in the second-best situation? How does the menu compare to the
18.2 Solve for the optimal linear price per ounce of coffee that the coffee shop would charge in Example 18.4. How does the shop's profit compare to when it uses nonlinear prices? Hint: Your first step should be to compute each type's demand at a linear price p.
18.1 A personal-injury lawyer works as an agent for his injured plaintiff. The expected award from the trial (taking into account the plaintiff's probability of prevailing and the damage award if she prevails) is I, where / is the lawyer's effort. Effort costs the lawyer 12/2.a. What is the
17.12 Hyperbolic discounting The notion that people might be "shortsighted" was formalized by David Laibson in "Golden Eggs and Hyperbolic Discounting" (Quarterly Journal of Economics, May 1997, pp. 443-477). In this paper the author hypothesizes that individuals maximize an intertemporal utility
17.11 Renewable timber economics The calculations in Problem 17.4 assume there is no difference between the decisions to cut a single tree and to manage a woodlot. But managing a woodlot also involves replanting, which should be explicitly modeled. To do so, assume a lot owner is considering
17.10 Monopoly and natural resource prices Suppose that a firm is the sole owner of a stock of a natural resource.a. How should the analysis of the maximization of the discounted profits from selling this resource (Equation 17.58) be modified to take this fact into account?b. Suppose that the
17.9 Precautionary saving and prudence The Query to Example 17.2 asks how uncertainty about the future might affect a person's savings decisions. In this problem we explore this question more fully. All of our analysis is based on the simple two-period model in Example 17.1.a. To simplify matters,
17.8 Capital gains taxation Suppose an individual has W dollars to allocate between consumption this period (c) and consumption next period () and that the interest rate is given by r.a. Graph the individual's initial equilibrium and indicate the total value of current-period savings (W-co).b.
17.7 Suppose that a perfect substitute for crude oil will be discovered in 15 years and that the price of this substitute will be the equivalent of an oil price of $125 per barrel. Suppose the current marginal extraction cost for oil is $7 per barrel. Assume also that the real interest rate is 5
A high-pressure life insurance salesman was heard to make the following argument: "At your age a $100,000 whole life policy is a much better buy than a similar term policy. Under a whole life policy you'll have to pay $2,000 per year for the first four years but nothing more for the rest of your
17.5 This problem focuses on the interaction of the corporate profits tax with firms' investment decisions. 17.6a. Suppose (contrary to fact) that profits were defined for tax purposes as what we have called pure economic profits. How would a tax on such profits affect investment decisions?b. In
17.4 As in Example 17.3, suppose trees are produced by applying 1 unit of labor at time 0. The value of the wood contained in a tree is given at any time t by f(t). If the market wage rate is wand the real interest rate is r, what is the PDV of this production process, and how should r be chosen to
17.3 As scotch whiskey ages, its value increases. One dollar of scotch at year 0 is worth V(t) = exp{2t 0.15t) dollars at time t. If the interest rate is 5 percent, after how many years should a person sell scotch in order to maximize the PDV of this sale?

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Microeconomic Theory Basic Principles And Extensions 10th Edition Walter Nicholson, Christopher M. Snyder - Solutions

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