the average variable cost b) Marginal cost is smaller than the average variable cost c) Marginal cost equals the average variable cost d) None of the above 6. The difference between the average total cost curve and the average variable cost curve gets smaller at higher quantity of output because a) The average variable cost is a constant b) The average total cost is decreasing for all output levels c) The average fixed cost is decreasing as output increases
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show that‚ if a consumer prefers more to less then his indifference curves cannot cross. 2) Suppose that current and future consumption are perfect substitutes. The indifference curves will consist of parallel lines with the negative slope m‚ where m > 0. a) How does the marginal rate of substitution between current and future consumption relate to the geometry (i.e. the slope and the intercept) of the consumer’s indifference curves? b) Given perfect substitutes‚ is more preferred to less
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weighted portfolio investing in all three assets and the return of an equally weighted portfolio investing only in assets 1 and 3? 4) Consider investors with preferences represented by the utility function U = E(r) − 1 Aσ 2 . 2 (a) Draw the indifference curve representing a utility level
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Chapter 1 NAME The Market Introduction. The problems in this chapter examine some variations on the apartment market described in the text. In most of the problems we work with the true demand curve constructed from the reservation prices of the consumers rather than the “smoothed” demand curve that we used in the text. Remember that the reservation price of a consumer is that price where he is just indifferent between renting or not renting the apartment. At any price below the reservation
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and label the following bundles: A (2‚10) B (6‚2) C (0‚4) D (8‚10) E (4‚6) (b) Assume A is indifferent to B (A ∼ B). On a single line‚ list all the bundles in descending order of preference using ( ) to denote strict preference and (∼) to denote indifference between adjacent pairs. In other words‚ use the form: A B C D E Answer: D E A∼B C‚ or D E B∼A C. 10 2 2. Consider an economic agent who has preferences that are represented by the utility function: u(x‚ y) = √ xy (a) for each pair of bundles
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constraint MSC: Analytical 5. If the relative price of a concert ticket is 3 times the price of a meal at a good restaurant‚ then the opportunity cost of a concert ticket can be measured by the a. slope of the budget constraint. b. slope of an indifference curve. c. marginal rate of substitution. d. income effect. ANS: A PTS: 1 DIF: 2 REF: 21-1 TOP: Budget constraint MSC: Analytical 6. When the price of a shirt falls‚ the a. quantity of shirts demanded falls. b. quantity of shirts demanded rises. c
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worker in the home country can produce three cars or two televisions. Assume that Home has four workers. a. Graph the production possibilities frontier for the home country. b. What is the no‐trade relative price of cars at Home? 2. Suppose that each worker in the Foreign country can produce two cars or three TVs. Assume that Foreign also has four workers. a. Graph the production possibilities frontier for the Foreign country. b. What is the no‐trade relative price of cars in Foreign
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HW 1 (1) Draw an indifference curve map with the quantity of pennies are on the horizontal axis and the quantity of nickels are on the vertical axis. Given the shape of your indifference curve‚ how would you describe the typical relationship between these two “products”? The two goods are perfect substitutes for each other. 5pennies are equivalent to a nickel. (2) You and I are in consumer equilibrium. CDs cost 10 dollars each and cassette tapes only 2 dollars each. I consume CDs and cassettes
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understanding of what lies behind demand curves and why‚ for example‚ demand curves almost always slope downward. The utility maximizing model is also crucial in determining the supply of labor in Chapter 14‚ general equilibrium in Chapter 16‚ and market failure in Chapter 18. So play up these applications when selling students on the importance of the material in this chapter. Section 4.1 focuses on graphically deriving individual demand and Engel curves by changing price and income. Section
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Plot and label the following bundles. A (2‚ 10) B (6‚ 2) C (0‚ 4) D (8‚ 10) E (4‚ 6) b. Assume A is indifferent to B. On a single line‚ list all the bundles in descending order of preference using (≻) to denote strict preference and (∼) to denote indifference between adjacent pairs as‚ e.g.‚ in the form A ≻ B ≻ C ∼ D ≻ E. 2. Consider an economic agent who has preferences that are represented by the utility function: u(x‚ y) = √ xy a. For each pair of bundles A and B‚ indicate whether A ≻ B‚ A ≺
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