6.8) Indicate whether each of the following statements is true, false, or uncertain. Explain why d. Tom’s workplace provides free access to a fitness room; Jerry’s does not. Horizontal equity requires that Tom be taxed on the value of having access to the fitness room

6.8) Indicate whether each of the following statements is true, false, or uncertain. Explain why d. Tom’s workplace provides free access to a fitness room; Jerry’s does not. Horizontal equity requires that Tom be taxed on the value of having access to the fitness room

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.3P

See similar textbooks

Similar questions

1. Write down an exchange economy model with two individuals and two goods, in whichthere is no consumption externality. State and explain the key assumptions of the model.Using the model, answer the following questions:(a) Explain carefully how the concept of Pareto efficiency differs from that of socialwelfare.(b) State the Second Theorem of Welfare Economics and explain carefully why it holds.What is the importance of the assumption of convex preferences to this theorem?
Consider a worker who earns $20/hour in the labor market and receives $50 per week innon-labor income. Assume the total number of hours available for work (h) and leisure(L) is 168 hours per week (i.e., ? = 168 = ℎ + ?). a. Draw the budget constraint for this individual. Label the endowment point. b. What is the maximum value of consumption that this individual could achieve ina week? c. In the United States, the Fair Labor Standards Act requires workers to be paid 1.5times their usual hourly wage for “overtime” work, defined as work in excess of40 hours in a week. If this law applies to the worker described above, how does itchange the budget constraint? d. Now suppose Congress passes an income tax. The income tax applies to labor andnon-labor income. The Fair Labor Standard Act is still in effect. The first $1,000in weekly income is exempt from the tax. However, every dollar above $1,000 istaxed at a rate of 10%. (To be clear: the tax on $1,000 in income is 0, the tax on$1,001 is…
1. Second Fundamental Theorem of Welfare Economicsa. Describe the theorem, making sure that you define clearly the terms used in thedescription (e.g. if you use the term “efficient” you have to describe what this means).b. Explain why the theorem implies that there is no intrinsic trade-off between efficiencyand interpersonal equity. c. Demonstrate your argument using an Edgeworth box, making sure that you describe allthe elements of the box appropriately.
Second Fundamental Theorem of Welfare Economics a. Describe the theorem, making sure that you define clearly the terms used in the description (e.g. if you use the term “efficient” you have to describe what this means). b. Explain why the theorem implies that there is no intrinsic trade-off between efficiency and interpersonal equity. c. Demonstrate your argument using an Edgeworth box, making sure that you describe all the elements of the box appropriately.
1. Write down an exchange economy model with two individuals and two goods, in whichthere is no consumption externality. State and explain the key assumptions of the model.Using the model, answer the following questions:(a) Explain carefully how the concept of Pareto efficiency differs from that of socialwelfare.(b) State the Second Theorem of Welfare Economics and explain carefully why it holds.What is the importance of the assumption of convex preferences to this theorem?(c) Explain the concept of the utility possibility frontier. What is the role of the utilitypossibility frontier in the social welfare maximization problem of a welfarist society?
3.a. State and explain the First Theorem of Welfare Economics and discuss its economicimplications and significance.b. State and explain the Second Theorem of Welfare Economics and discuss its economicimplications and significance.c. Explain the concept of production possibility frontier and interpret the slope of theproduction possibility frontier in economic terms.
Which of the following is an example of a positiveexternality?a. Dev mows Myra’s lawn and is paid $100 for theservice.b. Dev’s lawnmower emits smoke that Myra’sneighbor Xavier has to breathe.c. Myra’s newly cut lawn makes her neighborhoodmore attractive.d. Myra’s neighbor Xavier offers to pay her if shekeeps her lawn well groomed.
Consider an employee who does not receive employer-based health insurance and must divide her $10,000 per week in after-tax income between health insurance and "other goods." Draw this worker's opportunity set if the price of health insurance is $2,000 per week and the price of "other goods" is $1,000 per week. On the same graph, illustrate how the opportunity set would change if the employer agreed to give this employee $2,000 worth of health insurance per week (under current tax laws, this form of compensation is nontaxable). Would this employee be better or worse off if, instead of the health insurance, the employer gave her a $2,000 per week raise that was taxable at a rate of 25 percent? Explain.
Please no written by hand Suppose all workers have the same preferences represented by U = (sqroot)w - 2x , where w is the wage and x is the proportion of the firm’s air that is composed of toxic pollutants. There are only two types of jobs in the economy, a clean job (x = 0) and a dirty job (x = 1). Let w0 be the wage paid by the clean job and w1 be the wage paid for doing the dirty job. If the clean job pays $16 per hour, what is the wage in dirty jobs? What is the compensating wage differential?
6 Assume you can work as many hoursyou wish at £12 per hour (net of tax). If you do not work you have noincome. You have no ability to borrow or lend, so your consumption,c , is simply equal to your income. d) Now assume that you receive an income of £140 per week from anunknown benefactor. Show the impact on your feasible set and show anew optimal choice in which consumption increases but labour supplydecreases. Using the concept of the marginal rate of substitution, explainwhy this is a likely outcome. Please illustrate on a diagram so I can better understand it please thank you.
How would you demonstrate part b) diagramatically 6. Assume you can work as many hours you wish at £12 per hour (net of tax). If you do not work, you have no income. You have no ability to borrow or lend, so your consumption, c, is simply equal to your income. a) Derive and plot the feasible set, between daily values of consumption c, and “leisure”, l. Label the values at the intercepts (the points where the feasible frontier cuts the two axes). b) Assume that your optimal choice of consumption and leisure is to work 8 hours per day. Illustrate this choice diagrammatically using the feasible set and indifference curves.
1. How should goods and/or factors be allocation when there is an inequality? Explain mathematically through formula and in words: a. MRS of individual A is greater than MRS of individual B. How to reallocate X and Y? b. MRTS of good X is greater than MRTS of good Y. How to reallocate L and K? c. Overall MRS is greater than MRT. How to reallocate X and Y?