Suppose that choice sets are convex. State assumptions about tastes that are necessary and sufficient to guarantee that the first order conditions are necessary and sufficient for identifying a true optimum.
What will be an ideal response?
First order conditions are necessary and sufficient for an optimum if there are no corner solutions and no multiple "solutions" (where some of them are local minima). Ruling out corners solutions is accomplished by assuming that all goods are essential. Ruling out multiple "solutions" is done by assuming convex tastes. Thus, assuming convex tastes and all goods being essential makes first order conditions necessary and sufficient.
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Natural resources:
A. are production inputs that come from the earth. B. are natural talents people are born with that make them productive. C. are physical structures that sit on the earth, improving it and making it more productive. D. None of these is true.
A decrease in the price of a commodity results in a(n)
a. decrease in supply b. decrease in quantity demanded c. increase in demand d. decrease in quantity supplied e. increase in supply
Assume for Brazil that the opportunity cost of each cashew is 100 peanuts. Which of these pairs of points could be on Brazil's production possibilities frontier?
a. (200 cashews, 30,000 peanuts) and (150 cashews, 35,000 peanuts) b. (200 cashews, 40,000 peanuts) and (150 cashews, 30,000 peanuts) c. (300 cashews, 60,000 peanut) and (200 cashews, 50,000 peanuts) d. (300 cashews, 60,000 peanuts) and (200 cashews, 80,000 peanuts)
Suppose there is a high inequality in household income between the highest and the lowest income groups in one country. In response, the government raises the income tax for the highest income group and provides subsidies to the lowest-income group. What
would happen to the Lorenz curve as a result of the government programs? Explain. What will be an ideal response?