Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Chapter 3, Problem 14CQ
To determine
Identify the relevance of the way of thinking.
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not use ai please
For the two questions, use the provided Lorenz curve.
Income
100%
Lorenz curve
If the economy's income were distributed according
to the Equality line, what would the Gini coefficient
be?
1
0
0.5
Infinity
80
60
60
60
10
40
If the economy's income were distributed according
to the A line, how much of the economy's income is
earned by the third quintile of families?
60%
40%
20%
100%
20
Equality
0
20%
40
40
A
50
60
80
100
Families
1. For the following utility functions, (i) calculate the MRS, (ii) show whether the MRS is constant, or
diminishing, or increasing, (iii) calculate the degree of homogeneity, (iv) check the convexity of the
Indifference Curve using the condition that for a function to be strict quasi-concave, it must be that
f2f11-2f1f2f12+ ff22 < 0, (v) based on MRS's characteristics, draw an approximate Indifference
Curve, and (vi) comment on the type of utility function.
(a) U(x, y) = 3x + y
(b) U(x, y)=√√x y
(c) U(x, y)=√√x + y
(d) U(x, y)=xy
x+y
Chapter 3 Solutions
Macroeconomics: Private and Public Choice
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- A 9R, where 1-b 1-b Question Two Consider the IS-LM Model. Let the IS equation be Y = (1b) is the marginal propensity to save, g is the investment sensitivity to interest rates, and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where k and 1 are income and interest sensitivity of money demand, and Mo is real money balances. Mo k k It is given b = 0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176. a) Utilize the given numbers to substitute the variables in the model, and then write down the IS-LM equation system in matrices form. b) Solve for the equilibrium values of Y and R using Cramer's Rule. (Note: Keep 2 digits after the decimal point.)arrow_forwardSuppose that a family's income is exactly the same as the poverty threshold. This family's income deficit would be and their ratio of income to poverty would be 130 0; 1 ○ 1 %3 030 Consider a family of four in 2008, whose poverty threshold is $22,024. If this family's total income was $16544, what would their income deficit be? Income deficit: $arrow_forward3. Based on the 'Compensation Wage Differentials,' (CWD) answers the next questions: In an economy where workers only have two options in their daily lives: work in firm 1 and be at home. The next equation gives the labour supply for the firm 1, Ls¹(w) = -40 + w. a) How much is it willing to pay worker number 10 to stay at home? b) If a new firm (firm 2) is hiring in this market, and its supply of labour is Ls²(w) = -80+ w. Which firm (1 or 2) is considered an ‘uncomfortable' workplace? c) What is the CWD for the firm considered an ‘uncomfortable' workplace when it wants to hire employee number 10? d) Two industries require workers with the same characteristics (skills and experience). Industry B is recognized as having much more hazardous working conditions than Industry A. What is the CWD between the two industries? Industry A Industry B Demand Supply 5 10 15 20 25 5 10 15 20 Labor (Hours) Labor (Hours) Demand Supplyarrow_forward
- What percentage of the total population is categorized as belonging to the second quintile? Give your responses as whole numbers. The data in the table characterizes the income distribution for a country. Income category first quintile Share of income Cumulative share of (%) income (%) 7.0 second quintile 15.0 22.0 third quintile 45.0 fourth quintile 29.0 fifth quintile 26.0 percentage of population in second quintile: % What percentage of the total income for the country is earned by the third quintile? percentage earned by the third quintile: % What is the cumulative share of income earned by the poorest 80% of the population? percentage earned by the poorest 80%: ୪୧arrow_forward1. Comment on the following ideas. You can say if they are true, false, or uncertain and argue your answers. a) Producers in competitive markets have incentives to reduce the quality of their products and the safety of their workplaces and to cheat consumers and workers generally. b) Labour unions raise the wages of all workers. c) Increasing the minimum wage will reduce employment in every type of market d) In a monopoly market, the demand for good Q shifts to the left, declining Q's price. However, because the monopoly short-run equilibrium is different from the perfect competition equilibrium, its demand for labour is unaffected.arrow_forward2. a) The Value of the Marginal Product of Labour in a local bakery is VMPL = 20 – 0.5L, where "L" is the number of workers. If workers' wages are $10 per hour, how many will the bakery hire? b) What is the economic meaning of the value -0.5?arrow_forward
- Question One a) Calculate the determinant of matrix A. Show your work in steps: A = 2013-2 - -2 1 3 2 -1 1 0 1 2 3 3-12 4 -3 1 1 3 2 0 b) Prove row linear independence is necessary and sufficient to column linear independence in the same matrix. c) Derive the inverse matrix of matrix B. Show your work in steps: [3 20 01 4 300 B = 0 0 6 5 LO 0 7 6]arrow_forwardAnalyze replacing a commercial oven with $800 annual maintenance and a $3,000 salvage value with a new one for $15,000 and $300 annual maintenance. The company's MARR is 12% per year.arrow_forwardPlease correct answer and don't used hand raitingarrow_forward
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