Suppose the marginal value of bread in terms of wine is 1/2 bottle of wine per loaf of
bread, while the relative price of bread in terms of wine is 1/4 bottle of wine per loaf of
bread. Explain how the consumer can adjust his purchases to raise his level of
satisfaction.
In a sequential game, guaranteed commitment to a strategy will make a player worse
off.
Under what circumstances will an individual’s labor supply curve become backward
bending? Explain.
Describe the effect that a surplus of tobacco will have on a cigarette producer’s pricing
and production decisions.
If the potential Pareto criterion rejects a policy change, then the efficiency criterion will
reject it as well.
Describe how a Clarke tax is designed and explain how it leads a person to correctly
reveal his preferences for a public good.
The difference between the earnings of a college graduate and an unskilled worker
constitute the rent on human capital.
Trade will never be beneficial when both parties have a comparative advantage in
producing the same good.
Tom can make one table or mow 20 lawns in a 10 hour work day. Because Tom is more
productive mowing lawns, we conclude that he has an absolute advantage in that
activity.
Consider the following:
The most efficient house cleaner is the person who has the lowest cost of cleaning
houses.
A Nash equilibrium need not be Pareto optimal, and a Pareto-optimal outcome need not
be a Nash equilibrium.
If a fall in supply and a rise in demand occur at the same time, then we know that the
price must also rise.
A monopsonist will continue to hire additional laborers as long as their marginal
revenue product exceeds the wage rate.
An attorney that finds a loophole in a law has formed a creative response to the law.
When a consumer spends all of the income, it must be true that they are maximizing
utility.
The first step in economic analysis is to choose an appropriate equilibrium condition.
Optimization typically requires use of the equimarginal principle.
The Stackelberg equilibrium of a sequential game must also be a Nash equilibrium.