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survey of economics

Questions and Answers of Survey Of Economics

=+a. Lakshani has $200 to spend on sneakers and sweaters. Sneakers cost $50 per pair, and sweaters cost $20 each. She is thinking about buying 2 pairs of
=+5. For each of the following situations, decide whether the bundle Lakshani is considering is optimal or not. If it is not optimal, how could Lakshani improve her ‘overall level of utility? That
=+from all the bundles on his budget line—Bernie will choose.
=+the quantity of energy bars increasing from left to right, and the quantity of smoothies increasing from right to left. Using this diagram and the utility-maximizing principle of marginal analysis,
=+utility of each energy bar and the marginal utility of each smoothie. Then calculate the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies.c.
=+The price of an energy bar is $2, the price of a smoothie is $4, and Bernie has $20 of income to spend.a. Which consumption bundles of energy bars and smoothies can Bernie consume if he spends all
=+accompanying table shows Bernie’s utilities from smoothies and energy bars.Utility from Utility from Quantity of smoothies | Quantityof energy bars (utils) | energybars (utils)oO oO oO oO 1 32 2
=+consumption bundle containing 20 smoothies and 10 energy bars.c. Smoothies cost $3 each, and energy bars cost $10 each. Bruno has income of $50. He is considering a consumption bundle containing 10
=+consumption bundle containing 15 smoothies and 10 energy bars.b. Smoothies cost $2 each, and energy bars cost $5 each. Bruno has income of $110. He is considering a
=+3. Bruno can spend his income on two different goods: smoothies and energy bars. For each of the following three situations, decide if the given consumption bundle is within Bruno’s consumption
=+time, But soda vending machines, once you have paid for one soda, dispense only one soda at a time.
=+concept of marginal utility to explain the following: Newspaper vending machines are designed so that once you have paid for one paper, you could take more than one paper at a
=+each additional marshmallow. And there is a point at which he becomes satiated: beyond that point, more marshmallows actually make him feel worse rather than better. 2. Use the
=+he does admit that the more times he sees an episode, the less exciting it gets.d. Al loves toasted marshmallows. The more he eats, however, the fuller he gets and the less he enjoys
=+better.” Each time he turns the volume up a notch, he adds 5 utils to his total utility. c.Al enjoys watching reruns of the X Files. He claims that these episodes are always exciting, but
=+1. For each of the following situations, decide whether Al has diminishing marginal utility. Explain.a. The more economics classes Al takes, the more he enjoys the subject. And the more classes he
=+Cite examples of income and substitution effects from the cast
=+ 3. Give an example of a normal good and an inferior good mentioned in this case.
=+2. What feature of this case study illustrates diminishing marginal utility at work?
=+2 promotion resemble a consumer’s optimal choice problem?
=+ 1. How does the McPick
=+c, how would you determine whether or not cafeteria meals are a Giffen good?
=+2. In the example described in Question 1
=+c. The cost of a semester-long meal ticket at the student cafeteria rises, representing a significant increase in living costs. Assume that cafeteria meals are an inferior good.
=+b. Apartment rents have risen dramatically this year. Since rent absorbs a major part of her income, Delia moves to a smaller apartment. Assume that rental housing is a normal good.
=+a. Orange juice represents a small share of Clare’s spending. She buys more lemonade and less orange juice when the price of orange juice goes up. She does not change her spending on other goods.
=+ In opposite directions? Why?
=+1. Mn each of the following cases, state whether the income effect, the substitution effect, or both are significant. In which cases do they move in the same direction?
=+2. Explain what is faulty about the following statement, using data from Table 10-3: “Tn order to maximize utility, Sammy should consume the bundle that gives him the maximum marginal utility per
=+Explain why this is not Sammy’s optimal consumption bundle. Illustrate your answer using the budget line in Figure 10-3.
=+1.In Table 10-3 you can see that marginal utility per dollar spent on egg rolls and marginal utility per dollar spent on Cokes are equal when Sammy increases his consumption of egg rolls from 3 to
=+axis and pairs of underwear on the horizontal axis.
=+b. The consumption bundle consists of underwear and socks. The price of each pair of underwear is $4.00, the price of each pair of socks is $2.00, and the consumer’s income is $12.00. In your
=+the consumer’s income is $20.00. In your diagram, put movie tickets on the vertical axis and buckets of popcorn on the horizontal axis.
=+price of each ticket is $10.00, the price of each bucket of popcorn is $5.00, and
=+a. The consumption bundle consists of movie tickets and buckets of popcorn. The
=+1. In the following two examples, find all the consumption bundles that lie on the consumer's budget line. Illustrate these consumption possibilities in a diagram and draw the budget line through
=+c. When Dexter was a struggling student, his enjoyment from a good restaurant meal was greater than now, when he has them more frequently
=+b. Although Mei’s iTunes music collection is huge, her enjoyment from buying another album has not changed as her collection has grown.
=+a. The more Mabel exercises, the more she enjoys each additional visit to the gym.
=+3. In each of the following cases, determine if the consumer experiences diminishing marginal utility. Explain your answer.
=+Which generates the least?
=+2. Marta drinks three cups of coffee a day, for which she has diminishing marginal utility. Which of her three cups generates the greatest increase in total utility?
=+1. Explain why a rational consumer who has diminishing marginal utility for a good would not consume an additional unit when it generates negative marginal utility, even when that unit is free.
=+How do income and substitution effects show the effects of changes in income and prices on consumers’ choices?
=+What is the optimum consumption bundle and why do we use marginal analysis to determine it?
=+Why does the principle of diminishing marginal utility accurately describe consumer behavior?
=+ do economists use the concept of utility to describe people’s tastes?
=+What factors determine how consumers spend their income?
=+b. If the interest rate is 8%, should Pfizer invest in the development of the new drug? Why or why not
=+a If the interest rate is 12%, should Pfizer invest in the development of the new drug? Why or why not?
=+one year from now, the drug will generate annual profits of $4. million for three years.
=+ 3. The drug company Pfizer is considering whether to invest in the development of a new cancer drug. Development will require an initial investment of $10 million now; beginning
=+in two years’ time, and $300,000 in three years’ time. The interest rate is 20%. How would you prefer to receive your prize?
=+that is paid out as follows: $300,000 now, $300,000 in one year’s time, $300,000
=+2. You have won the state lottery. There are two ways in which you can receive your prize. You can either have $1 million in cash now, or you can have $1.2 million
=+b. Now suppose the interest rate is 80%. Calculate the present value of the costs incurred under each plan. Which reconstruction plan is now less expensive?
=+incurred under each plan. Which reconstruction plan is less expensive?
=+ii. Keep the highway open during construction, at an annual cost of $200 million per year for four years.a. Suppose the interest rate is 10%. Calculate the present value of the costs
=+the highway during construction, at an annual cost of $267.5 million per year for two years.
=+its decision in 2017, one year before the start of construction (so that the first payment was one year away). So the department of transportation had the following choices: i. Close
=+would take much longer and be more expensive. Suppose that construction would take four years if the highway were kept open, at a total cost of $800 million. The state department of transportation
=+1. Suppose that a major city’s main thoroughfare, which is also an interstate highway, will be completely closed to traffic for two years, from January 2018 to December 2019, for reconstruction
=+c. Should Hiro continue working as a consultant, or should he teach economics instead?
=+b. What is Hiro’s economic profit?
=+a. What is Hiro’s accounting profit?
=+computer that he uses for business. If he didn’t use the computer, he could sell it and earn yearly interest of $100 on the money created through this sale. Hiro’s total revenue for the year is
=+‘WORK IT OUT 33. Hiro owns and operates a small business that provides economic consulting services. During the year he spends $57,000 on travel to clients and other expenses. In addition, he
=+12. You have been hired as a consultant by a company to develop the company’s retirement plan, taking into account different types of predictably irrational behavior commonly displayed by
=+f. Barry considers himself an excellent investor in stocks. He selects new stocks by finding ones with characteristics similar to those of his previous winning stocks. He chalks up losing trades to
=+e. Sahir overpaid when buying a used car that has turned out to be a lemon. He could sell it for parts, but instead he lets it sit in his garage and deteriorate.
=+position at $25,000 per year. . Kimora has planned a trip to Florida during spring break in March. She has several school projects due after her return. Rather than do them in February, she figures
=+other job, also at a high school, pays $25,000 per year and is. virtually guaranteed for five years; after those five years, he will be evaluated for a permanent teaching position at the school.
=+prestigious high school, and he will be paid $35,000 per year. He thinks he will probably be able to find another good job in the area after the two years are up but isn’t sure. The
=+with the success of the program. . Rick has just gotten his teaching degree and has two job offers. One job, replacing a teacher who has gone on leave, will last only two years. It is ata
=+instead of prices, the store listed suggested donations based on the cost of the goods. All profits went toa charitable foundation set up by Panera. A year later, the store was pleased
=+a. Kookie’s best friend likes to give her gift cards that Kookie can use at her favorite stores. Kookie, however, often forgets to use the cards before their expiration date or loses them.
=+11. In each of the following examples, explain whether the decision is rational or irrational. Describe the type of behavior exhibited.
=+Which quantity gives De Beers the highest total profit?
=+a. Draw the marginal cost curve and the marginal benefit curve and, from your diagram, graphically derive the optimal quantity of diamonds to produce.b. Calculate the total profit to De Beers from
=+the accompanying table, along with its total cost schedule.Quantity of dia Totalbenefit | Total cost o So So 1 1,000 50 2 1,900 100 3 2,700 200 4 3,400 400 5 4,000 800 6 4,500 1,500 7 4,900 2,500 8
=+working for only 1 hour? 10. Assume De Beers is the sole producer of diamonds. When it wants to sell more diamonds, it must lower its price in order to induce shoppers to buy more. Furthermore,
=+Patty chooses to work for 1 hour. Compare her total profit from working for 1 hour with her total profit from working the optimal number of hours. How much would she lose by
=+a. Use marginal analysis to determine Patty’s optimal number of hours worked.b, Calculate the total profit to Patty from working 0 hours, 1 hour, 2 hours, and so on. Now suppose
=+9. Patty delivers pizza using her own car, and she is paid according to the number of pizzas she delivers. The accompanying table shows Patty’s total benefit and total cost when she works a
=+vaccinated.b. Using marginal analysis, determine the optimal percentage of the population that should be vaccinated.
=+a. Calculate the marginal benefit (in terms of lives saved) and the marginal cost (in terms of lives lost) of each 10% increment of smallpox vaccination. Calculate the net increase in human lives
=+vaccination has undesirable, and sometimes fatal, side effects. Suppose the accompanying table gives the data that are available about the effects of a smallpox vaccination program.Percent of popu
=+a. Use marginal analysis to find Lauren’s optimal number of karate classes per week. Explain your answer.b. Use marginal analysis to find Georgia’s optimal number of karate classes per week.
=+gets from each class per week.Lauren’s Quantity of marginal benefit classes of each class 0) $23 1 19 2 14 3 8 4 Georgia’s marginal benefit of each class$28 22 15 7
=+7. Georgia and Lauren are economics students who go to a karate class together.Both have to choose how many classes to go to per week. Each class costs $20. The accompanying table shows Georgia’s
=+b. You increase the price of a one-hour workout to $16.25. What is the optimal number of customers per hour that you should admit now?
=+a. Suppose that each customer pays $15.25 for a one-hour workout. Use the profit-maximizing principle of marginal analysis to find the optimal number of customers that you should admit per hour.
=+Quantity of Marginal cost customers per hour of customer 0) $14.00 1 14.50 2 15.00 3 15.50 4 16.00 5 16.50 6 17.00 7
=+Customers are costly to admit because they inflict wear and tear on the exercise equipment. Moreover, each additional customer generates more wear and tear than the customer before. As a result,
=+a. Calculate Amy’s, Bill’s, and Carla’s marginal costs, and draw each of their marginal cost curves.b. Who has increasing marginal cost, who has decreasing marginal cost, and who has constant
=+Quantity of lJawns&mo | Amy’stota | Bill’stotal | Carla’s tot wed cost cost al cost 0) So So So 1 20 10 2 2 35. 20 7 3 45 30 7 4 50 40 32 5 52 50 52 6 53 60 82
=+Justify your answer by calculating the benefits and costs of your decision. 5, Amy, Bill, and Carla all mow lawns for money. Each of them operates a different lawn mower. The accompanying table
=+the baseball game will give you a benefit equal to $35. You tell your friends the following: “If I had known about the baseball game before buying the ticket to the soccer game, I would have gone
=+4. You have bought a $10 ticket in advance for the college soccer game, a ticket that cannot be resold. You know that going to the soccer game will give you a benefit equal to $20. After you have

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