A basic assumption used in many economic models is:
A) as price goes up, the amount purchased will go up too.
B) as price goes up, less will be offered for sale on the market.
C) if the underlying theory doesn't represent reality, it is not useful.
D) ceteris paribus, which means all other things remain unchanged.
Ans: D) ceteris paribus, which means all other things remain unchanged.
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Currently, the price of consuming housing is lowered by the fact that home mortgage interest is tax deductible. Suppose the government proposed to eliminate this implicit subsidy of your housing consumption and at the same time lowers taxes on all other goods.
a. With housing consumption on the horizontal axis and all other consumption on the vertical, illustrate you current optimal consumption bundle. b. After looking over the government's proposal, you decide that you don't care one way or another whether the government implements this proposal. On your graph, indicate your new budget constraint and new optimal bundle under the proposal. c. I also look over the proposal and find that my current consumption bundle also lies on the budget constraint I would face under the proposal. Am I also indifferent between the two proposals? What will be an ideal response?
If price discrimination enables sellers to increase net revenues, why don't all sellers try it? Because
A) some sellers can't manipulate their price. B) some sellers can't control resentment. C) some sellers can't prevent low-price buyers reselling to high-price buyers. D) of all the above reasons.
Refer to Table 2-11. This table shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland
a. Which country has an absolute advantage in the production of cell phones? b. Which country has an absolute advantage in the production of lumber? c. What is Estonia's opportunity cost of producing one cell phone? d. What is Finland's opportunity cost of producing one cell phone? e. What is Estonia's opportunity cost of producing one board foot of lumber? f. What is Finland's opportunity cost of producing one board foot of lumber? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce cell phones? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce lumber?
According to Tobin's q theory, when q is ________, firms will not purchase new investment goods because the market value of firms is ________ relative to the cost of capital
A) low; low B) low; high C) high; low D) high; high