Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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- 2arrow_forwardT Suppose your classmate Gilberto offers you a wager: He will choose a playing card at random from a deck and pay you $1,000 if it is red, but you have to pay him $1,000 if it is black. Assume your wealth is currently $3,000. The graph shown below plots your utility as a function of wealth. Use the graph to answer the questions that follow. 100 ips ips 88888 UTILITY (Units of utility) + + 2 3 WEALTH (Thousands of dollars) + (? The shape of your utility function implies that you are a the difference in utility between C and A is individual, and, therefore, you rence between A and B. risk-friendly accept the wager because Which of the following sentences most appropriately des risk-averse pain of losing $1,000 is greater than the joy of winning $1,000 for individuals who are risk averse? Check all that apply. The more wealth that risk-averse people have, the more satisfaction they receive from an additional dollar. The more wealth that risk-averse people have, the less satisfaction they…arrow_forwardUTIITY (Units of utility) 10 Suppose your friend Deborah offers you the following bet: She will flip a coin and pay you $2,000 if it lands heads up and collect $2,000 from you if it lands tails up. Currently, your level of wealth is $6,000. The graph shows your utility function from wealth. Use the graph to answer the following questions. 100 90 80 B 70 A 60 50 40 30 20 10 WEALTH (Thousands of dollars)arrow_forward
- Suppose that Timmy lives in a neighborhood where graffiti is common. People's cars and the sides of houses are often vandalized with graffiti In response to the vandalism, the people in the neighborhood have proposed a voluntary community fund to pay for extra police patrols. There are 1000 people in Timmy's neighborhood, and each is recommended to contribute $10 a month Timmy's car has recently been vandalized and he is concerned it may happen again. Although he believes that he will benefit from the extra police patrols, Timmy has decided to take a free-rider approach Given his thinking, how much will Timmy contribute to the fund? Timmy's contribution: $ Assume that the entire neighborhood has the same mentality as Timmy. What will occur? The rate of graffiti in the neighborhood will increase significantly Everyone will contribute money towards the community fund, yielding higher rates of police patrol and less graffiti No one will contribute to the community fund, resulting in no…arrow_forwardHi, I need some help with the attached question. It is taken from an optimisation problem set in my intermediate maths for economists course.arrow_forwardOn July 1, 1965, the federal ad valorem taxes on many goods and services were eliminated. Comparing prices before and after this change, we can determine how much the price fell in response to the tax's elimination. Given an ad valorem tax of v, the tax collected on a good that sold for p was vp. If the price fell by vp when the tax was eliminated, consumers must have been bearing the full incidence of the tax. Consequently, consumers got the full benefit of removing the tax from those goods. The entire amount of the tax cut was passed on to consumers for all commodities and services that were studied for which the taxes were collected at the retail level (except admissions and club dues) and for most commodities for which excise taxes were imposed at the manufacturer level, including face powder, sterling silverware, wristwatches, and handbags (Brownlee and Perry, 1967). List the conditions (in terms of the elasticities or shapes of supply or demand curves) that are consistent with…arrow_forward
- can explain this question? tq A consumer decides not to buy a VCR when her income is $20,000. However, when her income rises to $30,000, she decides to buy one. In a single diagram, draw the budget lines and indifference curves to illustrate this situation (assume the VCR costs $300 in both time periods). Be sure to label your diagram completely.arrow_forwardGLASS-1: Short Individual Assessment 10 A B E D U. 1 2 4 cheeseburgers 1. Refer to the figure as you answer the following questions: Bundle E has one less cheeseburger than Bundle D. What assumption(s) would still allow you to say that Bundle E is preferred to Bundle D? Briefly explain. d. Consider the utility function of individual A given by UA (X,Y) = Xº.5y0.5 in answering the items below: 2. Calculate the marginal utility for each good (MU,x & MUy) of individual A and the marginal rate of substitution (MRSxY). Interpret your computed values If Px = 0.5, Py = 1, and I = 10, solve for X*, Y*, and U* using the Lagrange a. b. Multiplier Method. pearl shakesarrow_forwardSolve all this question......you will not solve all questions then I will give you down?? upvote.... Need some help, will leave like. Thank you!arrow_forward
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