PRINCIPLES OF ECONOMICS
14th Edition
ISBN: 2810015433483
Author: OpenStax
Publisher: OpenStax
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Textbook Question
Chapter 1, Problem 13RQ
What are examples of individual economic agents?
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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).
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Chapter 1 Solutions
PRINCIPLES OF ECONOMICS
Ch. 1 - What is scarcity? Can you think of two causes of...Ch. 1 - Residents of the town of Smithfield like to...Ch. 1 - A consultant works for 200 per hour. She likes to...Ch. 1 - A computer systems engineer could paint his house,...Ch. 1 - What would be another example of a system in the...Ch. 1 - Suppose we extend the circular flow model to add...Ch. 1 - What is an example of a problem in the world...Ch. 1 - The chapter defines private enterprise as a...Ch. 1 - Why might Belgium, France, Italy, and Sweden have...Ch. 1 - Give the three reasons that explain why the...
Ch. 1 - What are three reasons to study economics?Ch. 1 - What is the difference between microeconomics and...Ch. 1 - What are examples of individual economic agents?Ch. 1 - What are the three main goals of macroeconomics?Ch. 1 - How did John Mayhem Keynes define economics?Ch. 1 - Are households primarily buyers or sellers in the...Ch. 1 - Are firms primarily buyers or sellers in the goods...Ch. 1 - What are the three ways that societies can...Ch. 1 - What is globalization? How do you think it might...Ch. 1 - Suppose you have a team of two workers: one is a...Ch. 1 - Why would division of labor without trade not...Ch. 1 - Can you think of any examples of free goods, that...Ch. 1 - A balanced federal budget and a balance of trade...Ch. 1 - Macroeconomics is an aggregate of what happens at...Ch. 1 - Why is it unfair or meaningless to criticize a...Ch. 1 - Suppose, as an economist, you are asked to analyze...Ch. 1 - Why do you think that most modern countries...Ch. 1 - Can you think of ways that globalization has...
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