Principles of Microeconomics, California Edition
2nd Edition
ISBN: 9780393622102
Author: Dirk Mateer, Lee Coppock
Publisher: NORTON
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Chapter 16.A, Problem 2SP
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Draw the indifference curves for forks and knifes.
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what is change in TC / change in Q? and what would be an example?
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Problem 3-ABC Challenges: Attrition, Balance and ComplianceCan television inform people about public affairs? Political scientists Bethany Albertson and Adria Lawrence (2009) conducted an experiment in which they randomly assigned people to treatment and control groups to evaluate the effect of watching TV on a person’s information level. Those assigned to the treatment group were told to watch a specific television broadcast and were later asked questions related to what they watched. Those in the controlgroup were not shown the TV broadcast but were asked questions related to the material in the TV broadcast.
The dataset contains the following variables: : Dummy variable which =1 if a person reads news and 0 otherwise. : interest in political affairs (not interested=1 to very interested=4) : years of education : female dummy variable (female=1; male=0) : family income in thousands of dollars : information level (low information level=1 to high information level=4)
=1 if the…
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Principles of Microeconomics, California Edition
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- Problem 2-Experiments/Randomized Control Trial Suppose you are interested in studying the effect of academic counselling on the years it takes for a student to obtain an undergraduate degree. You conduct a randomized control trial to answer the question. You randomly assign 2500 individuals in a university in New York to receive academic counselling and 2500 students to not receive any academic counselling. a. Which people are a part of the treatment group and which people are a part of thecontrol group? b. What regression will you run? Define the variables where required. c. Suppose you estimate = -0.3. Interpret it. d. You test for balance using the variables mentioned in the table below. Based on the results do you think that the treatment and control group are balanced? If your answer is “yes” then explain why. If your answer is “no”, then explain why and mention how will you address the issue of imbalance. e. Suppose that some unmotivated students in the control group decided to…arrow_forwardHow to calculate total cost?arrow_forwardProblem 1-Experiments/Randomized Control TrialSuppose you are interested in studying the effect of being a part of the labor union on anindividual’s hourly wage.You collect data on 1000 people and run the following regression. where is a dummy variable which is equal t to 1 for people who are a part of labor union and0 for others. a. Suppose you estimate . Interpret b. Do you think is biased or unbiased? Explain. Now suppose you conduct a randomized control trial to answer the same question. Yourandomly assign some individuals to be a part of the labor union and others to not be a partof the labor union. The first step you take is to ensure that the randomization was donecorrectly. Then you estimate the following equation: =1 if the student is assigned to be a part of Labor Union=0 if the student is assigned to not be a part of Labor Union c. Why is it important to ensure that the randomization is done correctly? d. Name any two variables that you can use to test if Treatment and…arrow_forward
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- What is the deficit?arrow_forwardIdentify the two curves shown on the graph, and explain their upward and downward slopes. Why does curve Aintersect the horizontal axis? What is the significance of quantity d? What does erepresent? How would the optimal quantity of information change if the marginal benefit of information increased—that is, if the marginal benefit curve shifted upward?arrow_forward6. Rent seeking The following graph shows the demand, marginal revenue, and marginal cost curves for a single-price monopolist that produces a drug that helps relieve arthritis pain. Place the grey point (star symbol) in the appropriate location on the graph to indicate the monopoly outcome such that the dashed lines reveal the profit-maximizing price and quantity of a single-price monopolist. Then, use the green rectangle (triangle symbols) to show the profits earned by the monopolist. 18 200 20 16 16 14 PRICE (Dollars per dose) 12 10 10 8 4 2 MC = ATC MR Demand 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Millions of doses per year) Monopoly Outcome Monopoly Profits Suppose that should the patent on this particular drug expire, the market would become perfectly competitive, with new firms immediately entering the market with essentially identical products. Further suppose that in this case the original firm will hire lobbyists and make donations to several key politicians to extend its…arrow_forward
- Consider a call option on a stock that does not pay dividends. The stock price is $100 per share, and the risk-free interest rate is 10%. The call strike is $100 (at the money). The stock moves randomly with u=2 and d=0.5. 1. Write the system of equations to replicate the option using A shares and B bonds. 2. Solve the system of equations and determine the number of shares and the number of bonds needed to replicate the option. Show your answer with 4 decimal places (x.xxxx); do not round intermediate calculations. This is easy to do in Excel. A = B = 3. Use A shares and B bonds from the prior question to calculate the premium on the option. Again, do not round intermediate calculations and show your answer with 4 decimal places. Call premium =arrow_forwardAnswer these questions using replication or the risk neutral probability. Both methods will produce the same answer. Show your work to receive credit. 6. What is the premium of a call with a higher strike. Show your work to receive credit; do not round intermediate calculations. S0 = $100, u=2, d=0.5, r=10%, strike=$150arrow_forwardAnswer these questions using replication or the risk neutral probability. Both methods will produce the same answer.arrow_forward
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