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mkatz1986 mkatz1986
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5 years ago
In an indifference curve/budget line diagram, a consumer's equilibrium consumption combination will occur
 
  A) inside the budget line.
  B) outside the budget line.
  C) on the budget line.
  D) at the origin.



Ques. 2

Information technologies ________ the demand for low-skilled labor, increase the ________ high-skilled labor, lower the wage rate of ________ labor, and raise the wage rate of ________ labor.
 
  A) decrease; demand for; low-skilled; high-skilled
  B) decrease; supply of; low-skilled; high-skilled
  C) do not change; supply of; high-skilled; low-skilled
  D) do not change; demand for; high-skilled; low-skilled



Ques. 3

Iran called on OPEC in November 2008 to cut production by a further 1 million to 1.5 million barrels per day when it meets in Cairo later this month. Why would OPEC, a cartel, restrict production?
 
  A) to decrease demand
  B) to increase supply
  C) to decrease quantity supplied
  D) to increase profits



Ques. 4

Rent seeking is devoted to the creation of
 
  A) monopolies.
  B) competitive industries.
  C) human capital.
  D) more elastic demand.



Ques. 5

Jason hires Maria to tutor him in economics. Jason is willing to pay 30 for the first hour of tutoring, 25 for the second, 20 for the third, 15 for the fourth, and 10 for the fifth.
 
  Maria has an opportunity cost per hour of 6 for the first, 9 for the second, 12 for the third, 15 for the fourth, and 18 for the fifth. What will be the equilibrium quantity of hours tutored and the equilibrium price? Explain why this quantity and price is the equilibrium. What is Jason's consumer surplus and what is Maria's producer surplus?



Ques. 6

A student wrote: A production quota is inefficient because it results in overproduction.
 
  At the quota quantity, marginal social cost is equal to the market price and marginal social benefit is less than the market price, so marginal social cost exceeds marginal social benefit. If you were the instructor, how would you correct this statement?



Ques. 7

What kind of elasticity is relevant when you are trying to figure out how a price cut by the burger shop next door will affect the demand for your pizza? Explain.
 
  What will be an ideal response?
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Answer verified by a subject expert
Zhengbo Y.Zhengbo Y.
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5 years ago
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(Answer to Q. 1)  C

(Answer to Q. 2)  A

(Answer to Q. 3)  D

(Answer to Q. 4)  A

(Answer to Q. 5)  The equilibrium quantity will be 4 hours of tutoring and the equilibrium price will be 15 per hour. The equilibrium quantity will be 4 hours of tutoring because for any of these first 4 hours, the marginal social benefit (to Jason) exceeds or is equal to the marginal social cost (to Maria). The price will be 15 per hour because that is the maximum price Jason is willing to pay for the fourth hour of tutoring and 15 is the minimum price Maria will accept for the fourth hour of tutoring. Jason's total consumer surplus is 30, the sum of 15 from the first hour plus 10 from the second plus 5 from the third plus 0 from the fourth. Maria makes a producer surplus of 18, the sum of 9 on the first hour plus 6 on the second hour plus 3 on the third hour plus 0 on the fourth hour.

(Answer to Q. 6)  The student errs in several important respects. There are errors of omission and commission. Here is a corrected statement: A production quota is inefficient because (if set below the equilibrium quantity) it results in overproduction underproduction. At the quota quantity, marginal social cost benefit is equal to the market price and marginal social benefit cost is less than the market price, so marginal social cost benefit exceeds marginal social benefit cost.

(Answer to Q. 7)  The cross elasticity of demand is the relevant elasticity. It is a measure of the responsiveness of the demand for a good to a change in the price of a related good. In the case in question, the required elasticity is the cross elasticity of demand for pizza with respect to the price of a burger.
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mkatz1986 Author
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5 years ago
Helps a lot <3
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