Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. The men are given food when they walk in and the women are given drink. Suppose they have very different preferences where food and drink provide utility. For men U = F?D? . For women U=min(F,D) The contract curve in the Edgeworth box using a
representative man and woman would be
a. a right angle connecting the lower left corner with the upper right corner.
b. a curve (not necessarily a line) connecting the lower left corner with the upper right corner.
c. a line connecting the lower left corner with the upper right corner.
d. a right angle connecting the upper left corner with the lower right corner.
c
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After eating four slices of pizza, you are offered a fifth slice for free. You turn down the fifth slice. Your refusal indicates that the
A. marginal benefit for the fifth pizza slice is less than its marginal cost. B. marginal benefit for the fourth pizza slice is negative. C. total benefit for the fifth pizza slice is negative. D. marginal benefit for the fourth slice is the largest among all slices.
If the marginal rate of substitution is not diminishing, it must mean that tastes violate convexity (assuming that our other assumptions about tastes hold).
Answer the following statement true (T) or false (F)
According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence of a surplus of labor
a. True b. False Indicate whether the statement is true or false
One major characteristic of the price system is that
A) consumers together are the ones who ultimately decide what is produced. B) individual sellers ultimately decide what is produced in the market. C) competition among sellers is reduced. D) all exchanges are regulated by the government.