One of the big ideas that serve as the foundation for the study of economics is that people respond predictably to ______.
a. changes in incentives
b. market externalities
c. government policies
d. intangible benefits
a. changes in incentives
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Currently. the price of consuming housing src="https://sciemce.com/media/3/ppg__cognero__Chapter_06_Doing_the_quot_Best_quot_We_Can__media__3e7add47-491f-48be-8fcb-fd865a8ddf80.PNG" style="vertical-align: -8px;" width="17px" height="28px" align="absmiddle" />. At the same time, the government lowers the tax on other consumption, lowering the price from 
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, raising the price from 
to 
to 
.
a. Write down your original budget constraint assuming the consumer has income I.
b. Suppose the utility function 
captures your tastes, and suppose 
, 
, 
, 
and 
. Write out the utility maximization problem for this consumer prior to any policy change.
c. How much housing and other goods will this consumer consume prior to any policy change?
d. When the policy change goes into effect, will this consumer still be able to afford the bundle you derived in (c)?
e. When the policy change goes into effect, what bundle will the consumer consume?
What will be an ideal response?
If businesses found that changing economic conditions made it attractive for them to hire a larger number of economics majors, we would expect
a. economics majors to receive a greater return on their human capital investment. b. a decrease in the employment opportunities for economics majors. c. lower wages for economics majors. d. fewer students to major in economics.
When a monopolist is producing the profit-maximizing rate of output, price is greater than the marginal cost of producing the last unit of output
Indicate whether the statement is true or false
When a company produces 5,000 units, total costs equal $150,000 and total variable costs equal $75,000. At this level of output, what is that company average fixed cost?
A) $75,000 B) $30 C) $225,000 D) $15