Question 2 Suppose that w = $5, r = $10 and your budget as the manager of a firm is C = $200 For all cases below, draw first the original isocost and then the new isocost (after the changes). In each diagram, clearly specify the x-intercept, the y-intercept and the slope for the new isocost and the old isocost. a. Suppose that your budget increases by $20; there is a "buy-one-get-one free" promotion on capital and the wage rate decreases by 20%. b. Suppose that if you pay a fee of $20, you get a "buy-one-get-one-free" promotion on capital. Suppose you also get 2 free unit of labor. %3D %3D

Question 2 Suppose that w = $5, r = $10 and your budget as the manager of a firm is C = $200 For all cases below, draw first the original isocost and then the new isocost (after the changes). In each diagram, clearly specify the x-intercept, the y-intercept and the slope for the new isocost and the old isocost. a. Suppose that your budget increases by $20; there is a "buy-one-get-one free" promotion on capital and the wage rate decreases by 20%. b. Suppose that if you pay a fee of $20, you get a "buy-one-get-one-free" promotion on capital. Suppose you also get 2 free unit of labor. %3D %3D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Joe's coffee shop faces an isocost curve given by C=10L+5K where L is the number of employees and K is the number of coffee machines. If Joe's total budget is 100 and he has 5 employees, he can afford ___ machines. The slope of the isocost curve (with K on the y-axis) is ___. For each additional employee, to keep his costs the same, Joe has to give up ___ machines.
Question 1 Consider a person with the utility function U (C, L) = (1 − α) log C + α log L, where L is leisure time and C is consumption of other goods measured in dollars. The person has V dollars of non-labor income and a wage of w. There are T hours available for either working or leisure. 1. Write down the person’s budget constraint. Draw a graph representing this constraint, taking care to label the axes and key points. 2. What are the person’s marginal utilities for consumption and leisure? What is her marginal rate of substitution between leisure and consumption in terms of C, L, and α? 3. Write down a condition involving the person’s marginal rate of substitution that characterizes her optimal choice. Represent this condition graphically and interpret in words. 4. Solve for the person’s optimal choices of leisure and consumption, L ∗ and C ∗ , in terms of T, V , w, and α. 5. How does L ∗ change as you increase wage w and non-labor income V ? 6. How does C ∗ change as you…
It is known that the indifference curve is convex. What does this tell you about the relationship between the goods? 2. Using examples, does an increase in income affect a consumer’s budget line? Does it impact their total utility. 3.You are interested in starting a coffee shop at the University of the West Indies. Provide examples with explanations of explicit costs, implicit cost and sunk costs related to this business.
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Q5. Consider a utility function: U (F,C) = FC so MU_F = C and MU_C = F. Suppose as Case A, Total income is $120 and per unit prices of Food (F) and Cloth (C) are $2 and $10, respectively. a. What is the value of MRS at the optimal point and what does this value mean? b. What is the optimal consumption bundle i.e (F*,C*)? c. Plot the budget line and clearly depict the point of optimality in the F (x-axis)-C (y-axis) space. d. Now suppose Case B, where assuming if income decreases to $100, holding all else the same, do the same analysis (parts a-c) and contrast your answers to Case A. For part c, you should draw old (Case A) and new (Case B) budget lines/point of optimality.
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Let say you have 3 products: cake, candy, and bread. The revenue per cake is $8. The revenue per candy is $4. The revenue per bread is $5. Define the number of cake, candy, and bread you are about to produce per day as x, y, and z respectively. The manager wants that the number of candy is at least equal to the total number of cake and bread. What is the correct linear constraint to show this? Group of answer choices z – x – y ≥ 0 x – 2y – z ≥ 0 y – x – z ≥ 0 x – y – z ≥ 0
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Explain very much in detail, using graphs you draw on your own, but also proper English reasoning and math, why the optimum consumption point is defined by the tangent to the indifference curve having the same slope as the budget constraint. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
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