On the diagram above, show the new steady-state capital-labor ratio that results from a decrease in the saving rate. Can you say what has happened to the equilibrium level of consumption per worker?
What will be an ideal response?
As saving/investment falls, the equilibrium capital-labor ratio declines along the depreciation line. As the capital-labor ratio falls, output-per-worker declines along the production function. Beginning from the original equilibrium k* on the graph, the production function is clearly flatter than the depreciation line, so the decline in output is smaller than the decline in saving/investment, so that consumption per worker must be rising. Consumption per worker can fall only if k* is so low that the slope of the production function (at that level of capital per worker) is steeper than the depreciation line.
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In the above figure suppose there is only one milk producer who chooses to restrict milk production to two million gallons per day
What is the size of the deadweight loss? (Hint: It is equal to the triangular area of consumer and producer surplus that is lost because of the reduction in output.) A) $12.5 million B) $6.25 million C) $2.25 million D) none of the above
When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $690. In order to sell three units of output instead of only two, the monopolist must
A. make no change in price and increase output by one unit. B. decrease its price by $70 per unit. C. decrease its price by $30 per unit. D. decrease its price by $90 per unit.
The table above shows the total utility from the two goods Freddy likes to consume. If Freddy has consumed 4 fruit drinks and then decides to drink another
A) his total utility will increase. B) the marginal utility from the 5th drink equals 30. C) the marginal utility from the 5th drinks equals 50. D) Both answers A and B are correct.
The market demand curve
a. is found by vertically adding the individual demand curves.
b. slopes upward.
c. represents the sum of the prices that all the buyers are willing to pay for a given quantity of the good.
d. represents the sum of the quantities demanded by all the buyers at each price of the good.