(1A) If the consumer's income and all prices simultaneously decrease by one-half, then theoptimum consumption bundle will:a. shift outward relative to the original optimum.b. move leftward along the original budget constraint.c. shift inward relative to the original optimum.d. not change.Answer for Question 1A:(1B) Two companies, Acme and Pinnacle, each decide whether to produce a good quality productor a poor quality product. In the figure, the dollar amounts are payoffs and they represent annualprofits for the two companies.Acme's DecisionGood QualityРoor QualityAcme's profit = $6 millionAcme's profit = $5 millionGood QualityPinnacle's profit = $6 millionPinnacle's profit = $8 millionPinnacle'sDecisionAcme's profit = $8 millionAcme's profit = $7 millionPoor QualityPinnacle's profit = $5 millionPinnacle's profit = $7 millionIf this game is played only once, then the most likely outcome is that:a. both firms produce a poor quality product.b. Acme produces a poor quality product and Pinnacle produces a good quality product.c. Acme produces a good quality product and Pinnacle produces a poor quality product.d. both firms produce a good quality product.Answer for Question 1B:

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(1A) If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption bundle will: a. shift outward relative to the original optimum. b. move leftward along the original budget constraint. c. shift inward relative to the original optimum. d. not change. Answer for Question 1A:

(1A) If the consumer's income and all prices simultaneously decrease by one-half, then the optimum consumption bundle will: a. shift outward relative to the original optimum. b. move leftward along the original budget constraint. c. shift inward relative to the original optimum. d. not change. Answer for Question 1A:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7) A consumer has to choose the optimal amount of cheese and crackers to purchase. He or she has drawn his or her budget constraint (BC) and indifference curves on a graph with the amount of cheese (in ounces) on the horizontal axis and the amount of crackers (in packages) on the vertical axis. Which of the following statements is true if the price of crackers declines? The BC shifts to the left (down). The BC shifts to the right (up). The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a lower point. The BC rotates such that it intersects the horizontal axis at the same point as before and intersects the vertical axis at a higher point.
3) Diminishing marginal rate of substitution can be seen when indifference curves A) become flatter as we move down and to the right. B) are downward sloping. cross. D) are concave. 4) If the consumer's non-labor income increases while wages remain unchanged, what will happen to the budget line? A) The budget line shifts inward without a change in slope. B) The budget line rotates inward from the intercept on the horizontal axis. C) The budget line rotates outward from the intercept on the vertical axis. D) The budget line shifts outward without a change in slope.
SOLVE QUESTION B ONLY Suppose that you have an income of $20 to spend on sticky hands and gumballs. Both cost $1.00. a. Solve for the budget constraint in y = mx + b form, using gumballs as your x variable. Graph the budget constraint. Draw an indifference curve such that the optimal consumption bundle is 10 gumballs and 10 sticky hands. b. Suppose that the price of sticky hands falls to 50 cents. Draw the new budget constraint, original budget constraint from a.) and original indifference curve from a.) in a new graph. Draw a new optimal in indifference curve such that gumballs and sticky hands are complements and sticky hands are inferior goods.
If the consumer's budget constraint is given by 4P + 2B = 50 where P is Pizza and B is Burgers, the following bundles of Pizza and Burger would be on the budget constraint: P = 5; B = 10 P = 2; B = 21 P = 10; B = 20 %3D P = 2; B = 24
Suppose you are given the following information for a particular individualconsuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200.a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possibleconsumptions of a and b?b) What is the MRSab for the two goods?c) Is this person maximizing her utility? How can you tell?d) Should she consume more of good a or of b? Explain.e) Why can’t you tell what her optimal bundle is? Explain.
Maria spends all of her income of $2,000 on food (F) and clothing (C). The prices per unit are: PF = $5 and PC = $20. Graph Maria’s budget line, with F on the vertical axis and C on the horizontal axis and identity the slope of this budget line.
10) If indifference curves are concave to the origin, then at equilibrium: A) The indifference curve is tangent to the budget constraint. B) The consumer buys one good. C) The consumer buys a basket of goods. D) None of the above.
Emma consumes only two goods: Good A and Good B. Emma has a monthly salary of $1,000 from her part-time job. The price of Good A is $10. The price of Good B is $2. Emma currently consumes 5 units of Good A and consumes 25 units of Good B in a month. (a) Draw Emma's budget constraint and optimal consumption bundle. Please put Good A on the x-axis and Good B on the y- axis. (b) Emma has just received a 5% pay increase. The price of Good A and the price of Good B have increased by 5% as well due to inflation. Draw Emma's new budget constraint and optimal consumption bundle. Please put Good A on the x-axis. How many units of Good A does she consume? How many units of Good B does she consume?
Given the following budget constraint: PXQX + PYQY = M, where PX = $2, PY = $1 and M = $10 (M is income) a. What is the slope of the budget constraint in QX/QY space (where QX is on the horizontalaxis and QY is on the vertical axis)?b. What is the relative price of an additional unit of X?c. What is the relative price of an additional unit of Y
Assignment Graphically draw and explain the income effect curve: 1. Annie consumes two goods: sandwiches and coffee, with respective quantities s and c. Suppose the price of a sandwich is $6 and the price per coffee is $2. Annie's income is m. (b)Suppose m = $60. Write down Annie's budget constraint and plot her budget set and budget line (put c on the horizontal axis). Label everything carefully. ( 02 Marks) (c)Suppose m increases to $ 80, then whether the new budget constraint would shift parallel to right or left. Finally draw the Income Effect Curve. (02 Marks) 2. Why indifference curves never intersect. Prove graphically? (1 Mark)