1. Assume that two goods A and B are gross substitutes. If the price of A falls, this means that you will consume. of good B. a. More b. Less c. The same amount d. Ambiguous 2. If a worker's wage decreases, the substitution effect says their choice of leisure will while the income effect says it will a. Increase, decrease b. Decrease, increase c. Increase, increase d. Decrease, decrease 3. For a profit-maximizing monopsonist (only person hiring), they will hire labor until the MCE=MRPE. Consult the following table which I have started to fill out. What is the optimal number of workers for this firm to hire if their product sells for $15. Workers Wage MCE 0 3 0 1 2 3 4 5 a. 1 b. 2 c. 3 d. 4 9 21 30 39 3 15 *** ... *** Product/hour Revenue MPE MRPE N/A N/A 5 75 4 60 0 5 9 12 14 15 $0 $75 $135 *** ... .*** *** *** *** ... *** B E

1. Assume that two goods A and B are gross substitutes. If the price of A falls, this means that you will consume. of good B. a. More b. Less c. The same amount d. Ambiguous 2. If a worker's wage decreases, the substitution effect says their choice of leisure will while the income effect says it will a. Increase, decrease b. Decrease, increase c. Increase, increase d. Decrease, decrease 3. For a profit-maximizing monopsonist (only person hiring), they will hire labor until the MCE=MRPE. Consult the following table which I have started to fill out. What is the optimal number of workers for this firm to hire if their product sells for $15. Workers Wage MCE 0 3 0 1 2 3 4 5 a. 1 b. 2 c. 3 d. 4 9 21 30 39 3 15 * ... * Product/hour Revenue MPE MRPE N/A N/A 5 75 4 60 0 5 9 12 14 15 $0 $75 $135 * ... .* * * * ... * B E

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.9P

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