The picture in this exercise describes an economy that is experiencing a boom in total factor productivity z. The economy, after the boom, has reached point B. Point A is the evaluation of the substitution effect induced by the total factor productivity boom. What can you say about the consumption and leisure levels in the economy BEFORE the productivity boom? Select a point on the original indifference curve (purple curve) where consumption (and leisure) may have been before the productivity boom.

The picture in this exercise describes an economy that is experiencing a boom in total factor productivity z. The economy, after the boom, has reached point B. Point A is the evaluation of the substitution effect induced by the total factor productivity boom. What can you say about the consumption and leisure levels in the economy BEFORE the productivity boom? Select a point on the original indifference curve (purple curve) where consumption (and leisure) may have been before the productivity boom.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

The one-period model with quasi-linear utility predicts that a decrease in marginal income tax rates could increase tax collection if:Group of answer choices Substitution effects dominate income effects so that the percent change in taxes is greater than the percent change in GDP Substitution effects dominate income effects so that the percent change in taxes is less than the percent change in GDP Income effect dominate substitution effects so that the percent change in taxes is less than the percent change in GDP Income effects dominate substitution effects so that the percent change in taxes is greater than the percent change in GDP
Because Income depends on work effort and work effort depends on nutrition, suppose the relationship between income (Y) and total food availability (F) in a poor household is given by: Y = 10F + 20F2 – 0.6F3 a) If food availability in a two-person household is 20, would it be “rational” to share the food? Explain. b) If food availability in a two-person household is 30, would it be “rational” to share the food? Explain.
The graph below shows David’s preferences for leisure and consumption. Draw three budget constraints in the graph below. One if David’s wage is $10 per hour (BC1), another if his wage is $20 per hour (BC2) and a third for if his wage is $30 per hour (BC3). Show the optimal combination of leisure and consumption for each of the three budget constraints. Label the optimal amount of Leisure, L1, L2 & L3, and label the optimal amounts of consumption C1, C2 & C3.
Suppose Congress enacts a tax reform law, and the average federal tax rate drops from 30% to 10%. Researchers investigate the impact of the tax cut and find that the income subject to the tax increases from $600 billion to $700 billion. The theoretical explanation is that workers have increased their work effort in response to the incentive of lower taxes. On the following graph, use the green point (triangle symbol) to plot the point corresponding to the income of $600 billion. Then use the orange point (square symbol) to plot the point corresponding to the income of $700 billion. FEDERAL TAX REVENUE (Billions of dollars) 220 200 180 160 140 120 100 + 80 - 60 + 40 + 20 0 0 10 O True 20 O False 30 40 50 60 70 80 FEDERAL TAX RATE (Percent) 90 Laffer Curve 100 110 "A Income $600 Income $700 True or False: The change in income is represented by a movement along the upward-sloping portion of the Laffer curve. ?
QUESTION 7: Budget constraints Everyone is endowed with 168 hours in a week (24X7). If you work 40 hours or less, you w=$20 per hour. If you work overtime, you earn w-$25. Assume the worker has M= non-labor income and that the price of the consumption good is p. Draw the budget constraint. Label the intercepts and the slopes in both the overtime and non-overtime region.
If the indifference curve shifts and the MRS increases (in absolute value) for every bundle, it means: Households value leisure more than they did. Households now earn higher real wages than they did. Households now earn lower real wages than they did. O Households value consumption more than they did.