1. Question 1 - Question 7.

1 in the textbook
(Points: 25) Suppose that a young chef opened his own restaurant. To do so, he quit his job, which was paying 28,000 Euro per year; cashed in a 5,000 Euro certificate of deposit that was yielding 5 per cent (to purchase equipment); and took over a building owned by his wife which had been rented out for 1,000 per month. His expenses for the first year amounted to 50,000 Euro for the food, 40,000 for extra help and 4,000 for utilities. (1) What were the chef's total economic costs? (2) What were the sunk expenditures in this example? (3) What are the imputed costs of the chef's time? (4) What are the user cost of capital assuming a depreciation rate of 50 percent in the first year? (5) What are the accounting cost? Use ',' as 1,000 separator when giving your answers! 1. 2. 3. 4. 5.

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2. Question 2 - Question 8.5 in the textbook

(Points: 25) Suppose that a firm is producing exam-taking services using only labour and capital. The capital is fixed fo rthe next year and it pays 100 Euro per month in fixed cost. The Table on page 288 shows the amount of labour needed to produce various quantities of output (measued in examinations per month). Note that labour is in the top row and output in the bottom row (e.g. reversed of what they are in textbook).

Match the questions with their correct answers below.

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The marginal physical product of labour is variable. The marginal cost are long run decisions. Decisions about how many exams to take for the next year are short run decisions. Decisions about how many exams to take for the following year are increasing The marginal physical product of labour after L=4 is increasing then decreasing.

Matching pairs
The marginal physical product of labour is The marginal cost are Decisions about how many exams to take for the next year are Decisions about how many exams to take for the following year are The marginal physical product of labour after L=4 is Save Answer

3. Question 3 - Question 8.2 in the textbook

(Points: 10) Isoquants cannot cross for the same logical reasons that the indifference cuves cannot cross (transitivity).

TrueFalse Save Answer

4. Question 4 - Question 8.6 in the textbook

(Points: 15)

The production function in this example exhibits

1. Increasing returns to scale in the combined inputs of capital and labour. 2. Decreasing returns to scale in the combined inputs of capital and labour. 3. Decreasing returns to scale in labour. 4. Increasing returns to scale in capital. 5. Constant returns to scale in the respective inputs of capital and labour.

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5. Question 5 - Question 8.6 in the textbook

(Points: 25) Consider a company whose production function is as shown in the textbook on Page 289. Match the questions with their correct answers.

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What is the firm's output when it uses 9 units of labour and 4 units of capital? decreasing What happens to the firm's output when it doubles its input levels? 12 What if the initial levels are K0 and L0? constant Does this technology exibit increasing, decreasing or constant returns to scale? 2 What is the marginal physical product of labour if capital is constant? 6

Matching pairs
What is the firm's output when it uses 9 units of labour and 4 units of capital? What happens to the firm's output when it doubles its input levels? What if the initial levels are K0 and L0? Does this technology exibit increasing, decreasing or constant returns to scale? What is the marginal physical product of labour if capital is constant?

Review Questions for Chapter 4

Camilla Jensen Started: 08 December 2012 01:08 Questions: 6

1. Question 1 - Question 4.1 in the textbook

(Points: 10) In Japan, restrictions on the import of rice keeps the local price of rice at Pw+t=10 which is 10 times above the world price Pw=1. Suppose that these restrictions were relaxed. How would it affect the equilibrium bundle of a Japanese consumer with the following demand curve P=11qr? In other words what is the difference between qr before and after the policy change? 1.

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2. Question 2 - Question 4.1 in the textbook

(Points: 10) In the previous example - what is the change in the consumer surplus for one individual? 1.

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3. Question 3 - Question 4.1 in the textbook

(Points: 10) In the previous example what is the size of the recovered deadweight loss for one individual?

1.

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4. Question 4 - Question 4.4 in the textbook

(Points: 30) It would cost more to give the individual enough money in 1994 to buy the 1990 commodity bundle relative to giving the individual enough money in 1994 to attain his 1990 utility level.

TrueFalse Save Answer

5. Question 5 - Question 4.10 in the textbook

(Points: 20) Analyse the implications of a policy change from quotas to a tariff of 37.50 Euro in this example - see also Page 127 in the textbook. Match the right stakeholder of this policy with the impact of the policy change on stakeholders' welfare.

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The Japanese Producer Surplus and Government's Revenue decreases with the change. The European Community's Revenue is not affected by the change. The European Consumer Surplus increases with the change. The Japanese Consumer Surplus The size of the deadweight loss

Matching pairs
The Japanese Producer Surplus and Government's Revenue

The European Community's Revenue The European Consumer Surplus The Japanese Consumer Surplus The size of the deadweight loss Save Answer

6. Question 6 - Question 4.12 in the textbook

(Points: 20) Suppose that the demand curve for plus is given by Z=10-2P. Where Z is quantity demanded in kg and p is price per kg. Suppose the price is 1 Euro per kg. Answer the following: (1) What is the quantity demanded (2) What is the total expenditure (3) What is the consumer surplus 1. 2. 3.

Review Questions for Chapter 3

Camilla Jensen Started: 08 December 2012 01:04 Questions: 4

1. Question 1 - Review Question 3.4 in the textbook

(Points: 40) For Johan, X and Y are perfect substitutes. Specifically, he is always willing to substitute 3 units of X for 2 units of Y. The price per unit of X is 5, the price per unit of Y is 8 and Johan's income is 40. (1) Write up the equation for Johan's indifference curve (2) Write up the equation for Johan's budget constraint (3) How much does Johan consume of X? (4) Is the MRS (MUx/MUy) greater than, equal to or less than the relative prices (Px/Py) in optimum?

1. 2. 3. 4. Save Answer

2. Question 2 - Review Question 3.6

(Points: 10) In 1990 consumption of water per capita in Nevada was 1,690 gallons. In Florida it was 3,130

gallons. In that year, per capita income was 20,248 in Nevada and 18,785 in Flordia.

1. On the basis of these data on can conclude that water is a inferior good. 2. On the basis of these data one can conclude that water is a normal good. 3. Florida and Nevada are most likely on different demand curves for water due to various government, climatic and geopgrahical differences across the two states. 4. It shows that people in Florida have greater utility from showering than people in Nevada. 5. We can conclude that the price of water is much lower in Flordia compared to Nevada. Save Answer

3. Question 3 - Review Question 3.7

(Points: 30) In Canada, a taxpayer can deduct charitable contribution from his or her taxable income, but the deduction cannot exceed 20 percent of income. Consider a Canadian with an income of 40,000. Think of the budget constraint as charitable contributions on the x axis and 'all other goods' on the y axis. (1) How will the new tax law affect the slope of the budget constraint? Will it make the slope -flatter -steeper -unchanged (2) Will the new budget constraint after the tax law be a -straight line with a positive slope? -a kinked curve? -a horisontal line? -a vertical line? (3) Do you think the law will stimulate giving to charities? -yes -no -maybe 1. 2.

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4. Question 4 - Review Question 3.12

(Points: 20) Suppose the direct demand curve for X is linear and takes the following form: X=a-bP. In a P-X diagram (inverse demand curve) - the slope will then be -b and the intercept will be a.

Review Questions for Chapter 2

Camilla Jensen Started: 08 December 2012 01:02 Questions: 7

1. Question 1 - Review Question 2.1

(Points: 10) Which of the following statements are not consistent with the assumption of completeness and transitivity?

1. I just can't decide whether I would rather take a holiday in Spain or purchase a pair of skies. 2. After I've played two games of tennis, I don't want to play any more. 3. If you give me a ticket to the football match, I'll give you my new pair of socks. Save Answer

2. Question 2 - Review Question 7.1

(Points: 10) You have to read about food rationing in Cuba first (pp 47-48) before answering this question. The question then is as follows: The rationing example of Figure 2.21 is based on the assumption that it is impossible for Julio to obtain more than hi sallocation of 15 packs of rice per month. Suppose that, instead, he can obtain additional rice on the black market for 5 pesos per pack. Show how the existence of the black market affects Julio's budget constraint. Will Julio change the number of packet of rice he purchases?

1. The existence of the black market makes no difference for his choice because the rice is more expensive that in the main market. 2. The existence of the black market will always attract buyers like Julio who derive utility

from more rice. 3. The answer depends on Julio's preferences for rice. For example it may be that he considers bananas and rice perfect substitutes (1:1) in which case his consumption would not go up. But with convex preferences we could still sketch many situations where he would buy more rice although at a higher price. Save Answer

3. Qestion 3 - Review Question 7.1

(Points: 10) Referring to the previous question with how much does Julio's consumption possibility area go up because of the black market? 1. Save Answer

4. Question 4 - Review Question 2.7

(Points: 10) The black market does improve consumer welfare.

TrueFalse Save Answer

5. Question 5 - Review Question 2.13

(Points: 10) Write the correct equation for the student's budget constraint (which is not the one we used in class). 1. Save Answer

6. Question 6 - Review Question 2.13

(Points: 20) Calculate the student's optimum. 1. Save Answer

7. Question 7 - Review Question 2.13

(Points: 30) What is the student's MRS in optimum? 1. Save Answer