Any policy change that results in a Pareto - superior allocation A. will leave welfare unchanged. O B. will have an unpredictable effect on welfare. O C. must increase welfare. D. will increase welfare under certain conditions.
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- Which of the following is not a condition required for the first welfare theorem to hold: O a. No government policy interferes with the formation of prices. O b. No market actor has market power. © c. Tastes are quasilinear. O d. Income is distributed fairly before markets open. O e. (a) and (c) Of. (b) and (c) O g. (c) and (d) O h. (b) and (d)which statement is correct A result of welfare economics is that the price of a product is considered to be the best price because it maximizes total surplus. A seller would be willing to sell a product only if the price received is less than the cost of production. Suppose that the equilibrium wage in the labor market is $8.00 per hour of labor. If a law increased the minimum wage from $7.25 to $10.00 per hour of labor, any possible increase in producer surplus would be smaller than the loss of consumer surplus. In a market, for any given quantity, the price on a demand curve represents the marginal buyer's willingness to pay.Suppose that the initial allocation is point a between Ross and Rosa. A. Discuss how Ross’s condition be made better off without harming Rosa (i.e., Rosa maintains her level of utility). B. Illustrate this in a separate diagram and label point/s as necessary (also, if other point/s will have to be made or incorporated).
- Explain briefly the intuition behindthe fundamental theorems of welfare..a. What is an Inferior good? Sketch an Engel curve for inferior goods and clearly label the two axes. b. Briefly explain why demand may increase as price increases? (Hint: think about substitution and income effects.) c. What is the relationship between Inferior and Giffen goods? Use a Slutsky equation to justify your statement. d. Some people may work less when their wage rates go up. Why is it the case? (Hint: think about substitution effect and endowment income effect).Suppose there are 100 consumers with identical individual demand curves. When the price ofa movie ticket is $8, the quantity demanded for each person is 5. When the price is $4, thequantity demanded for each person is 9. Assuming the law of demand holds, which of thefollowing choices is the most likely quantity demanded in the market when the price is $6? Group of answer choices 700 1,000 1,200 400
- Suppose there are three (3) people in a market for bottles of perfume; Mutumbu, Jasanu and Julius The individual demand for perfumes for each of these consumers is given as 10 bottles for Mutumbu, 15 bottles for Jasanu and 25 bottles for Julius at $60 per bottle for perfume. Thus, the market demand for perfumes if the market price is $60 is. (a)40 bottles (b)60 bottles (c)80 bottles (d) None of theb abovePlease no written by hand and no image Assume that the consumer's preferences are such that the choice problem has a unique solution. There are two goods in the market, x and y. The price of good x is 3, and the price of good y is 5. With these prices, the consumer chooses the basket (x,y)=(4,4). (a) Due to economic policy actions (e.g., changes in taxation), the price of good x rises to 5, and the price of good y drops to 2. How do these actions affect the consumer's well-being? (b) What if the price of good x rises to 6, the price of good y drops to 2, and the consumer chooses the basket (x,y)=(3,7) at these prices?"(a) Draw a figure showing the separation of the substitution effect from the income effect (as defined by Hick) for a price increase. (b) Draw another figure showing the derivation of two demand curves for a price increase, one that keeps money income constant and the other that keeps real income constant as defined by Hicks (c) Which of the two demand curves you derived in part (b) is more price elastic for the price increase? Why? Would your answer change if the good were inferior? (d) Draw another figure showing why the demand curve that keeps money income is not really a demand curve at all.
- Roberto has $10 to allocate between a apples and bananas. The price of an apple is $1.00 and the price of a banana is $0.50. His marginal rate of substitution of apples for bananas (MRSa,b) equals a constant 3, regardless of what combination of apples and bananas he chooses. How many apples and bananas will he purchase?Monthly income = salary of 1200 and a gov welfare payment of 800 Y= 2000 Needs to use this income for food and goods quantity of food = qf quantity of goods= qd Price of food = 1 Price of goods = 2 1) Draw budget line, qf on vertical axis and qd on horizontal one 2) The welfare payment is now given in the form of food stamps. 1200 can be spent on food and other goods, food stamps can only be used to purchase food. The prices of food and other goods remain the same. budget line with the food stamps, measuring on the vertical axis and on the horizontal axis. Label all critical points on the budget line. Show you are at least as well off under the cash welfare payment as under the food stamps. Here is how: Depict the budget lines in 1. and 2a. in a single diagram and superimpose indifference curve(s) to show the optimal consumption bundle(s). You will need two such diagrams to illustrate two different cases: optimal consumption bundle is the same under the cash welfare…Show on graph and explain income and substitution effects considering that the government impose aproportional tax on income.