ANSWER THE FOLLOWING QUIZZES

QUESTION 1 We assume what about consumption goods and household produced goods in our model? They are not substitutable They are perfect substitutes They are both inferior goods People prefer market goods (C) to household produced goods (G) QUESTION 2 An increase in the wage rate will: "Increase the slope of the market wage budget constraint Decrease the slop of the market wage budget constraint Change the slope of the household production curve None of the above QUESTION 3 Which of the following would increase household productivity? 9 Injuring oneself Adding a child to the household who requires care Receiving an Increase your market wage rate None of the aboveSection 1: Consumer behavior, market power, monopoly This section consists of ten multiple choice questions. You should select ONLY ONE answer on each question. If I cannot determine which answer is selected, I will score the question as incorrect. Each correctly answered question is worth 2 points. 1. Which of the following statements about consumer surplus are correct? (a) Consumer surplus measures the difference between consumers' willingness to pay and price. (b) Consumer surplus is calculated as the area below the inverse demand curve and above the market price. (c) Both (a) and (b) are correct. 2. It is estimated that the market for aluminum exhibits a price elasticity of demand of e = -0.3. Which of the following statements is correct? (a) If demand for aluminum increases by 1 percent, the market price of alu- minum will decrease by 0.3 percent. (b) If the price of aluminum increases by one percent, the quantity demanded of aluminum will decrease by 0.3 percent. (c) Demand for aluminum is elastic. (d) The market for aluminum is a monopoly.2. Basic Macroeconomic Model of General Equilibrium under Perfect Competition: Household faces decision about how much to consume and how much to work, it also has some capital that it rents out, max log(C) + xlog(1 - Lh) C.LA s.t. C = whh +rKh where C is consumption, LA is labour supplied by household (so 1 - L, is leisure), Y is non-labour income, and w is the wage. There is a Firm with production function Y = LOK, ", where Y is production, and Ly is labour used in production (demanded), and Ky is captial used in production. Firms solve the profit maximization problem max Y-why - rks Y.Ly.K s.t. Y = IfK)- "Since the Household does not like capital in an of itself it will always choose to rent out all the capital it possesses