(a) The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

Question

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).

Answer 1

Question

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

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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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Questions from textbook: Santerre, Rexford, E., and Neun, Stephan P. Health Economics: Theories, Insights, and Industry Studies, 6th Edition, ISBN 13: 978-1-111-822729. Mason, OH: South-Western, Cengage Learning, 2013. 1. Suppose a health expenditure function is specified in the following manner: E = 500 + 0.2Y where E represents annual health care expenditures per capita and Y stands for income per capita. a. Using the slope of the health expenditure function, predict the change in per capita health care expenditures that would result from a $1,000 increase in per capita income. b. Compute the level of per capita health care spending when per capita income takes on the following dollar values: 0; 1,000; 2,000; 4,000; and 6,000. c. Using the resulting values for per capita health care spending in part B, graph the associated health care expenditure function. d. Assume that the fixed amount of health care spending decreases to $250. Graph the new and original health care functions on…

Answer 2

Question

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

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Answer 3

Question

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

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Answer 4

Question

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

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Answer 5

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

Answer 6

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

Answer 7

Chapter 1, Problem 8P

To determine

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

Answer 8

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

Answer 9

To determine

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

Answer 10

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

Answer 11

To determine

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

Answer 12

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

Answer 13

To determine

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

Answer 14

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

Answer 15

To determine

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

Answer 16

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Answer 17

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Answer 27

Ch. 1 - Prob. 1P Ch. 1 - Prob. 2P Ch. 1 - Prob. 3P Ch. 1 - Prob. 4P Ch. 1 - Prob. 5P Ch. 1 - Prob. 6P Ch. 1 - Prob. 7P Ch. 1 - Prob. 8P Ch. 1 - Prob. 9P Ch. 1 - Prob. 10P

(a) The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

Solution Summary: The author explains the difference between a normative statement and one that states 'what is'.

Concept explainers

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

Chapter 1 Solutions

(a) The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

Solution Summary: The author explains the difference between a normative statement and one that states 'what is'.

Concept explainers

(a) The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

(b) The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

(c) The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

(d) The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

(e) The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.

Chapter 1 Solutions

(a)

The kind of statement (normative/ positive or both) it is-higher tax rate would generate increased tax revenues and those extra tax revenues should be used to give more government aid to the poor.

(b)

The kind of statement (normative/ positive or both) it is-the study of physics is more valuable than the study of sociology, but both should be studied by all college students.

(c)

The kind of statement (normative/ positive or both) it is-the increase in the price of corn will decrease the amount of corn purchased. However, it will increase the amount of wheat purchased.

(d)

The kind of statement (normative/ positive or both) it is-A decrease in price of butter will increase the amount of butter purchased, but that would be bad because it would increase American's cholesterol levels.

(e)

The kind of statement (normative/ positive or both) it is-The birth rate is reduced as economies urbanize, but it also leads to a decreased average age of developing countries' population.