Principles of Microeconomics (12th Edition)
12th Edition
ISBN: 9780134078816
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 22, Problem 4.1P
To determine
Draw the consumption function then calculate the error term and the sum total.
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Advertising A small manufacturing firm collected the following data on advertising expenditures A (in thousands of dollars) and total revenue R (in thousands of dollars).
(a) Draw a scatter diagram of the data. Comment on the type of relation that may exist between the two variables
(b) The quadratic function of best fit to these data is R(A) = - 7.76A2 + 411.88A + 942.72 Use this function to determine the optimal level of advertising. (c) Use the function to predict the total revenue when the optimal level of advertising is spent. (d) Use a graphing utility to verify that the function given in part (b) is the quadratic function of best fit. (e) Use a graphing utility to draw a scatter diagram of the data, and then graph the quadratic function of best fit on the scatter diagram.
Using the data in the table below, calculate Aggregate Expenditure (AE), Savings (S), and increasing inventories Change (UI). Please ensure you show
and input the negative sign where necessary for your answers on savings and undesired inventory changes.
Aggregate Expenditure
(AE)
Number
Number
Number
Income (Y)
550
640
730
Consumption (C)
577.5
636
694.5
Investment (1)
135
135
135
Savings (S)
Number
Number
Number
Inventory Disequilibrium
Number
Number
Number
Common Property and Public Goods Problem
To water their vine yards, a group of farmers in Cyprus drill identical wells and draw irrigation water from an underground aquifer. This aquifer has a natural maximum recharge rate of 340,000 liters per day (in others words, a maximum of 340,000 liters of water per day filter into this underground reservoir from natural sources). The table below shows the relationship between the daily total water output (total product) and the number of wells operating.
Number of Wells Operating
Total Water Output (in 1000s of Liters/Day)
Total Revenue (TR)
Total Cost (TC)
Average Revenue (A VR)
Profit
0
0
0
0
0
0
10
100
20
200
30
280
40
340
50
380
60
400
70
400
80
380
90
340
(a) The cost of operating a well is €60/day and the value of water to each farmer is €0.1/liter. Using this information and the…
Chapter 22 Solutions
Principles of Microeconomics (12th Edition)
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