Economics Today: The Micro View (18th Edition)
18th Edition
ISBN: 9780133885071
Author: Roger LeRoy Miller
Publisher: PEARSON
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Question
Chapter 1, Problem 1.2LO
To determine
Three basic economics questions along with the emphasis of the two opposing sets of answers
Concept Introduction:
In every nation, three fundamental questions must be addressed irrespective of the form of its government or who heads that government, how rich or how poor the nation may be, or what type of economic system —the institutional mechanism through which resources are utilized to satisfy human wants—has been chosen. These are:
- What and how much will be produced?
- How will items be produced?
- For whom will items be produced?
The two opposing sets of answers discuss how a nation’s residents go about answering the three basic economic questions. The two opposing answers to these questions are provided by the type of economic system: either centralized command and control or the
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Exercise 6
Imagine that you head production of a multinational food processing company. The ongoing uncer-
tainty about costs means that you are unsure of the future cost of one of your inputs, x2. Your firm's
production function is
y = f(x1, x2) = x²x²²
The output price p is 1000, x1 = 27, and wx₁ = 60.
1. Suppose the current input price is Wx2
=
50. Solve for the optimal choice of x2.
2. Now suppose that the probability the input price remains 50 is 0.65 and the probability that
Wx2
60 is 0.35. Solve for the optimal choice of x2. Round down to the nearest integer.
=
3. Finally, suppose the costs do actually rise, i.e., Wx2 = 60. Calculate the difference in profit from
the uncertainty in (2) vs. the certainty in (1).
Chapter 1 Solutions
Economics Today: The Micro View (18th Edition)
Ch. 1.A - Prob. 1PCh. 1.A - Prob. 2PCh. 1.A - Prob. 3PCh. 1.A - Prob. 4PCh. 1.A - Prob. 5PCh. 1.A - Prob. 6PCh. 1.A - Prob. 7PCh. 1.A - Prob. 8PCh. 1 - Prob. 1.1LOCh. 1 - Prob. 1.2LO
Ch. 1 - Prob. 1.3LOCh. 1 - Prob. 1.4LOCh. 1 - Prob. 1.5LOCh. 1 - Prob. 1.1SCCh. 1 - Prob. 1.2SCCh. 1 - Prob. 1.3SCCh. 1 - Prob. 1.4SCCh. 1 - Prob. 1.5SCCh. 1 - Prob. 1CTQCh. 1 - Prob. 2CTQCh. 1 - Prob. 1FCTCh. 1 - Prob. 2FCTCh. 1 - Prob. 1PCh. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8PCh. 1 - Prob. 9PCh. 1 - Prob. 10PCh. 1 - Prob. 11PCh. 1 - Prob. 12PCh. 1 - Prob. 13PCh. 1 - Prob. 14PCh. 1 - Prob. 15PCh. 1 - Prob. 16P
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