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In an exchange economy A‘s utility is given byUA = x + yand B‘s byUB = min[x, 2y].The initial endowment for A is x = 10 y = 8 and for B, x = 8 y = 4. To reach […]

People who always choose not to participate in fair games are called a. risk takers. b. risk averse. c. risk neutral. d. broke. Suppose that the two persons in an exchange economy (A and B) have utility functions given by […]

An individual has a utility function for tennis rackets (x) and tennis balls (y) of the form U(x, y) = min (3x, y). His or her expenditure function is given by a. . b. . c. . d. . A […]

If the demand curve a firm faces shifts to the right, usually a. it would be impossible to tell whether the marginal revenue curve shifts. b. the marginal revenue curve would shift to the left. c. the marginal revenue curve […]

Continue to suppose as in the previous question that the utility function for each of the firm’s 5 workers is where l is hours worked and w is the wage. Suppose now that the firm can only monitor the total […]

A natural monopoly a. is a monopoly in the production of raw materials. b. occurs when one firm can supply the entire market more cheaply than can a number of firms. c. is one result of a patent. d. necessarily […]

The input demand functions that can be derived from cost functions are referred to as “contingent” demand functions because the functions: a. assume input costs are constant. b. express input demand as a function of output. c. depend on the […]

Which of the following “externalities” does not distort the allocation of resources? I. An individual’s unwillingness to cut his or her own lawn in an otherwise immaculately kept neighborhood. II. Smoke produced by a new firm in an area which […]

For the Cobb-Douglas utility function with two goods, the sum of the own price elasticities of demand must be a. 0. b. -1. c. -2 d. any number between 0 and -4. Two goods are Hicksian (net) substitutes if a […]

Externalities between two firms can be “internalized” if: I. The two firms merge. II. Bargaining costs are zero. III. The externalities affect each firm equally. IV. Marginal costs for both firms are constant. Which statement(s) correctly complete the sentence? a. […]