Refer to the information provided in Figure 20.2 below to answer the question(s) that follow.
Figure 20.2Refer to Figure 20.2. England has an absolute advantage in producing
A. trucks.
B. cars.
C. neither cars nor trucks.
D. both cars and trucks.
Answer: A
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When you purchase a new pair of jeans you do so in the
A) factor market. B) resource market. C) input market. D) product market.
If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2, then
A) he would give up 5 pizzas to get the next salad. B) he would give up 5 salads to get the next pizza. C) he will eat five times as much pizza as salad. D) he will eat five times as much salad as pizza.
Suppose there are only two people, Mr. Mullinax and Ms. Fleming, who must split a fixed income of $500. For Mr. Mullinax, the marginal utility of income is MU m = 600 - 2I m , while for Ms. Fleming, marginal utility is MU f = 600 - 3I f , where I m and I f are the amounts of income to Mr. Mullinax and Ms. Fleming, respectively.
(A) What is the optimal distribution of income if the social welfare function is additive? (B) What is the optimal distribution if society values only the utility of Ms. Fleming? What if the reverse is true? Comment on your answer. (C) Finally, comment on how your answers change if the marginal utility of income for both Mr. Mullinax and Ms. Fleming is constant such that Mu m = 250 = MU f . (This one is subtle.) The setup should be I m + I f = 500 and 600 - 3I f = 600 - 2I m
If Donald receives a pay raise and the income effect outweighs the price effect on his labor supply decisions, he will work:
A. more hours. B. less hours. C. the same amount. D. less hours initially but eventually work more.