Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 24, Problem 14SCQ
If the economy is operating in the neoclassical zone of the SRAS curve and aggregate
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
not use ai please
1. Lisa has $48 per week set aside for coffees (x) and lunches (z). The price of coffee is $4 and
lunches are $6. What is Lisa's budget line equation (with z on the left-hand side)? Graph the
budget line, and show how it changes when the price of lunches rise to $8 (including intercepts).
What is the new budget line equation?
2. Suppose utility for a consumer of movies (x) and golf (z) is U = 20x0.420.5. The consumer has set
aside $1000 to consumer movies and golf for a year.
a. If the price of movies is $20 and the price of golf is $40, what is the utility-maximizing
consumption of movies and golf?
b. Show the optimal consumption bundle on a graph, showing a budget line (with
intercepts), a tangent indifference curve, and the optimal choice.
3. Sam has set aside $480 for entertainment this month, which is golf (x) and/or bowling (z). A
round of golf is $40 and a night of bowling is $30. His utility function is U = 3x + 2z.
a. What is his MRS?
b. Solve for the optimal choice of golf…
Question Seven
There are specific applications of the hidden-action or moral hazard model. Consider employment
contracts signed between a firm's owners and a manager who runs the firm on behalf of the
owners. The manager is offered an employment contract which they can accept and decide how
much effort, e ≥ 0, to exert. Suppose that an increase in effort, e, increases the firm's gross profit,
not including payments to the manager, but is personally costly to the manager and the firm's gross
profit, Пg, takes the following form: Пg = e +ε, ε~N(0,2). Let s denote the salary, which may
depend on effort and/or gross profit, depending on what the owner can observe, offered as part of
the contract between the owner and manager. Suppose that the manager is risk averse and has a
utility function with respect to salary of the form:
Aσ²
U(W)=μ- 2
a) Derive the optimal result of the owner's expected net profit where there is full information and
state what it implies.
b) Suppose now that the…
Chapter 24 Solutions
Principles of Economics 2e
Ch. 24 - Describe the mechanism by which supply creates its...Ch. 24 - Describe the mechanism by which demand creates its...Ch. 24 - The short run aggregate supply curve was...Ch. 24 - In the AD/AS model, what prevents the economy from...Ch. 24 - Suppose the U.S. Congress passes significant...Ch. 24 - Suppose concerns about the size of the federal...Ch. 24 - How would a dramatic increase in the value of the...Ch. 24 - Suppose Mexico, one of our largest trading...Ch. 24 - A policymaker claims that tax cuts led the economy...Ch. 24 - Many financial analysts and economists eagerly...
Ch. 24 - What impact would a decrease in the size of the...Ch. 24 - Suppose, after five years of sluggish growth, the...Ch. 24 - Suppose the Federal Reserve begins to Increase the...Ch. 24 - If the economy is operating in the neoclassical...Ch. 24 - If the economy is operating In the Keynesian zone...Ch. 24 - What is says law?Ch. 24 - What is Keynes; law?Ch. 24 - Do neoclassical economists believe in Keynes law...Ch. 24 - Does Says law apply more accurately in the long...Ch. 24 - What is on the horizontal axis of the AD/AS...Ch. 24 - What is the economic reason why the SRAS curve...Ch. 24 - What are the components of the aggregate demand...Ch. 24 - What are the economic reasons why the AD curve...Ch. 24 - Briefly explain the reason for the near-horizontal...Ch. 24 - Briefly explain the reason for the near-vertical...Ch. 24 - What is potential GDP?Ch. 24 - Name some factors that could cause the SRAS curve...Ch. 24 - Will the shift of SRAS to the right tend to make...Ch. 24 - What is stagflation?Ch. 24 - Name some factors that could cause AD to shift,...Ch. 24 - Would a shift of AD to the right tend to make the...Ch. 24 - How is long-term growth illustrated in an AD/AS...Ch. 24 - How is recession illustrated in an AD/AS model?Ch. 24 - How is cyclical unemployment illustrated in an...Ch. 24 - How is the natural rate of unemployment...Ch. 24 - How is pressure for inflationary price increases...Ch. 24 - What are some of the ways in which exports and...Ch. 24 - What is the Keynesian zone of the SRAS curve? How...Ch. 24 - What is the neoclassical zone of the SRAS curve?...Ch. 24 - What is the intermediate zone of the SRAS curve?...Ch. 24 - Why would an economist choose either the...Ch. 24 - On a microeconomic demand curve, a decrease in...Ch. 24 - Economists expect that as the labor market...Ch. 24 - If new government regulations require firms to use...Ch. 24 - During spring 2016 the Midwestern United States,...Ch. 24 - Hydraulic fracturing (tracking) has the potential...Ch. 24 - Some politicians have suggested tying the minimum...Ch. 24 - If households decide to save a larger portion of...Ch. 24 - If firms become more optimistic about the future...Ch. 24 - If Congress cuts taxes at the same time that...Ch. 24 - Suppose the level of structural unemployment...Ch. 24 - If foreign wealth-holders decide that the United...Ch. 24 - The AD/AS model is static. It shows a snapshot of...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Explain why the short-run aggregate supply curve...Ch. 24 - Why might it be important for policymakers to know...Ch. 24 - In your view, is the economy currently operating...Ch. 24 - Are Says law and Keynes law necessarily mutually...Ch. 24 - Review the problem in the Work It Out titled...Ch. 24 - The imaginary country of Harris Island has the...Ch. 24 - Table 24.4 describes Santhers economy. Plot the...
Additional Business Textbook Solutions
Find more solutions based on key concepts
5. Which inventory costing method results in the lowest net income during a period of rising inventory costs?
W...
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
What is a qualitative forecasting model, and when is its use appropriate?
Operations Management
Questions For Review
12-4. How is the concept of the value package useful in marketing to consumers and industr...
Business Essentials (12th Edition) (What's New in Intro to Business)
Comparison of projects using Net Present Value. Reasons for the conflicts in ranking using Net Present Value an...
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
Asset Retirement Obligation, Disposal. Buckner Chemical Products reported the following Information on Its late...
Intermediate Accounting (2nd Edition)
What is the relationship between management by exception and variance analysis?
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Knowledge Booster
Similar questions
- 1. The IS/MP model assumes that the Fed sets the real interest rate at a given level Rt. Suppose the Fed adopts a monetary policy rule that instructs it how to change the real interest rate in response to short-run output. Let's call this a monetary policy rule (MPR): The parameter x is positive. Rt=+xY a) Redraw the IS/MP diagram replacing the MP curve with the MPR curve. Show how an aggregate demand shock affects output and interest rates in the short run. Use the IS and MPR equations to solve for the changes in output and the real interest rate. b) How does the change in a affect investment in the IS/MPR model? Explain how a tax cut affects short-run output and investment in this version of the short-run model. The effect on investment is called crowding out. c) Add the Phillips curve to complete the short-run model. Illustrate how the Fed's choice of large it makes reveals its trade off between inflation and output in the short run.arrow_forwardnot use ai pleasearrow_forwardFems A and B are duopolist producers of widgets. The cost function for producing widgets C(Q)-Q² The market demand function for widgets i Q-192P Qmeasures thousands of widgets per year, Competition in the widget market is described by the Coumot model Instructions: Round your answers to 2 decimal places a What are the firms' Nanh equbrium output? b. What is the resulting price? c. What do they each emp How does the price compare to marginal cost? Price is ck to marginal cost How do the price and the two fems' joint profit compare to the monopoly price and prof Compared to the monopoly price, the Cournot price is to sed. Compared to the monopoly profit, the joint profit of the two fems to selectarrow_forward
- Suppose the marginal social cost of television sets is $100. This is constant and equal to the average cost of television sets. The annual demand for television sets is given by the following equation: Q = 200,000-500P, where Qis the quantity sold per year and P is the price of television sets. a) If television sets are sold in a perfectly competitive market, calculate the annual number sold. Under what circumstances will the market equilibrium be efficient? b) Show the losses in well-being each year that would result from a law limiting sales of television sets to 100,000 per year. Show the effect on the price, marginal social benefit, and marginal social cost of television sets. Show the net loss in well-being that will result from a complete ban on the sales of television sets. (show with graphs.)arrow_forwardrefer to exhibit 8.12 and identify each curve in the grapharrow_forwardQ1. (Chap 1: Game Theory.) In the simultaneous games below player 1 is choosing between Top and Bottom, while player 2 is choosing between Left and Right. In each cell the first number is the payoff to player 1 and the second is the payoff to player 2. Part A: Player 1 Top Bottom Player 2 Left 25, 22 Right 27,23 26,21 28, 22 (A1) Does player 1 have a dominant strategy? (Yes/No) If your answer is yes, which one is it? (Top/Bottom) (A2) Does player 2 have a dominant strategy? (Yes/No.) If your answer is yes, which one is it? (Left/Right.) (A3) Can you solve this game by using the dominant strategy method? (Yes/No) If your answer is yes, what is the solution?arrow_forward
- not use ai pleasearrow_forwardsubject to X1 X2 Maximize dollars of interest earned = 0.07X1+0.11X2+0.19X3+0.15X4 ≤ 1,000,000 <2,500,000 X3 ≤ 1,500,000 X4 ≤ 1,800,000 X3 + XA ≥ 0.55 (X1+X2+X3+X4) X1 ≥ 0.15 (X1+X2+X3+X4) X1 + X2 X3 + XA < 5,000,000 X1, X2, X3, X4 ≥ 0arrow_forwardnot use aiarrow_forward
- Please help and Solve! (Note: this is a practice problem)arrow_forwardPlease help and thanks! (Note: This is a practice problem!)arrow_forwardUnit VI Assignment Instructions: This assignment has two parts. Answer the questions using the charts. Part 1: Firm 1 High Price Low Price High Price 8,8 0,10 Firm 2 Low Price 10,0 3,3 Question: For the above game, identify the Nash Equilibrium. Does Firm 1 have a dominant strategy? If so, what is it? Does Firm 2 have a dominant strategy? If so, what is it? Your response:arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning