MICROECONOMICS (LL) W/ CONNECT
21st Edition
ISBN: 9781260923933
Author: McConnell
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 9DQ
To determine
How Pre-commitment are useful in solving self-control problem.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You are the manager of an organization in America that distributes blood to hospitals in all 50states and the District of Columbia. A recent report indicates that nearly 50 americans contractHIV each year through blood transfusions. Although every pint of blood donated in the unitedstates undergoes a battery of nine different test, existing screening methods can detect only theantibodies produced by the bodyâs immune system-not foreign agents in the blood, newlyinfected HIV donors can pass along the virus through blood that has passed existing screeningtests. Happily, researchers have developed a series of new tests aimed at detecting and removinginfections from donated blood before it is used in transfusions. The obvious benefit of these testsis reduced incidence of infection through blood transfusions. The report indicates that the currentprice of decontaminated blood is $60 per pint. However, if the new screening methods areadopted, the demand and supply for…
Ahmed is an agent for Bader for maintaining Bader’s antique cars collection, including sale and purchase of antique cars. Ahmed has had this position for several years, but recently Ahmedhas developed a cocaine habit. He recently sold one of Bader’s cars and kept some of the money himself to buy some cocaine. Soon thereafter, Ahmed was declared bankrupt. The government then notified Ahmed that he had sold the maximum allowable number of cars in a year without getting a dealer’s license. Shortly thereafter, Bader was on a secluded island and died, which no one knew about until 2 weeks later. Discuss the effect of these events on the existence of the agency.
Suppose a two-person household. Person 1 has h1 units of time available and takes l1 units of leisure time, and person 2 has h2 units of time available and takes l2 units of leisure time. Collectively, the two persons in the household care about their total consumption c, and their total leisure l=l1+l2, and they have preferences over their total consumption and total leisure just as specified in the course. But person 1 faces a market wage w1, and person 2 faces a market wage w2, with w1 > w2.
1) Draw the budget constraint faced by the two-person household. What will the household do, that is, how much does each household member work?
2) What happens if w2 rises? (w1 > w2 still holds)
3) Explain your results and interpret
Chapter 8 Solutions
MICROECONOMICS (LL) W/ CONNECT
Knowledge Booster
Similar questions
- Refer to Table 11W.1 and suppose the price of new product C is $2 instead of $4. How does this affect the optimal combination of products A, B, and C for the person represented by the data? Explain: “The success of a new product depends not only on its marginal utility but also on its price.”arrow_forwardAnswer the given question with a proper explanation and step-by-step solution. Angela and Betty are deciding how many nights to stay at a resort. Given above are the budget lines and indifference curves for both Angela and Betty. They are not travelling together and therefore will make independent decisions (they do not have to stay the same number ofnights) L1 is the budget line for each of them before any discounts are offered. Each of them is offered a “Buy Three Nights Get One Free” deal, where if they stay for three nights the fourth night is free. This is just a one-time discount and all subsequent nights after the fourth night are at the undiscounted price. The budget line after the discount is the heavily shaded blue line L2. You may assume that each consumer wishes to maximize their utility (satisfaction) when determining the number of nights they will stay. (a) With the budget line at L1 how many nights will Angela stay?(b) With L1 the budget line how many nights will Betty…arrow_forwardBart and Lisa are both optimizing consumers in the market for shirts and hats, where they pay $100 for a shirt and $50 for a hat. Bart buys 8 shirts and 4 hats, while Lisa buys 6 shirts and 12 hats. From this information, ignoring the minus sign, we can infer that Bart's marginal rate of substiution is _________ hats per shirt, while Lisa's is __________ hat's per shirtarrow_forward
- For each of the pairs below, determine whetherthey are positively correlated, negatively correlated, or uncorrelated. [LO 1.5]a. Time spent studying and test scoresb. Vaccination and illnessc. Soft drink preference and music preferenced. Income and educationarrow_forwardSuppose that you have two opportunities to invest $1M. The first will increase the amount invested by 50% with a probability of 0.6 or decrease it with a probability of 0.4. The second will increase it by 5% for certain. You wish to split the $1M between the two opportunities. Let x be the amount invested in the first opportunity with (1-x) invested in the second. Find the optimal value of x. Using expected value as the criterion (linear utility) Using the flowing utility function: u(x)=2.3 ln〖(1+4.5x)arrow_forwardA common marketing tactic among many liquor stores is to offer clientele quantity (or volume) discounts. For instance, the second-leading brand of wine exported from Chile sells in the United States for $15 per bottle if the consumer purchases up to eight bottles. The price of each additional bottle is only $8. If a consumer has $200 to divide between purchasing this brand of wine and other goods, graphically illustrate how this marketing tactic affects the consumer's budget set if the price of other goods is $1. Assuming a consumer has standard indifference curves (i.e.,resembling those in Figure 4-2), will she ever purchase exactly 8 bottles of wine?arrow_forward
- In a simple exchange economy, Alex and Sid both have identical lexicographic preferences with a preference for maple syrup. This means that when comparing any two bundles, each of them would prefer the one with the larger amount of maple syrup regardless of the amount of poutine in those bundles. If the two bundles have identical amounts of maple syrup, then they would choose the one with a larger amount of poutine. The total amount of maple syrup in this economy is 15, and there are 21 plates of poutine. Describe the contract curve in this economy and justify your answer.arrow_forwardA manufacturer of microwaves has discovered that male shoppers, on average, have lower values for microwave ovens than female shoppers. Additionally, male shoppers attribute almost no extra value to an auto-defrost feature, while female shoppers, on average, value the auto-defrost feature. The manufacturer has determined that men value a simple microwave at $70 and one with auto- defrost at $80, while women value a simple microwave at $80 and one with auto-defrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue?arrow_forwardSuppose that there are 2 types of plans available to you. Plan A has a deductible of $500, with 10 percent co-insurance rate for many health care services. Plan B has a deductible fo $1000, with 35 percent co-insurance rate. Plan A costs $200 per month in premiums while Plan B costs $80. Discuss characteristics of people who would choose Plan A versus Plan B. Assuming that both plan types exist in the market, who would likely choose Plan B over Plan A? What plan would you choose?arrow_forward
- Consider two treatments. Treatment 1 saves one year of life at a cost of $10,000. Treatment 2 saves ten years of life at a cost of $1,000,000. Which treatment is more cost-effective? Why? Consider two treatments. Treatment 1 saves six years of quality adjusted life at a cost of $90,000. Treatment 2 saves three years of quality adjusted life at a cost of $60,000. Which treatment is preferred from a cost utility analysis perspective? Suppose Jay has been experiencing back pain and that there are two options for back pain: Treatment Regimen Total Cost Pain Reduction Do nothing $0 0 units Cortisone injections $600 30 units Calculate the ICER between cortisone injections and doing nothing. Jay says he is willing to pay $10 for a per unit of pain reduction. Should he choose cortisone injections? Another treatment is discovered. It costs $700 and reduces pain by 25 units. Should he choose the new treatment?arrow_forwardSuppose that each week Fiona buys 16 peaches and 4 apples at her local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that: If Fiona is maximizing her utility, then her marginal utility from the 16th peach she buys must be greater than her marginal utility from the 4th apple she buys. Fiona is not maximizing her utility. If Fiona is maximizing her utility, then her marginal utility from the 16th peach she buys must be equal to her marginal utility from the 4th apple she buys. The law of diminishing marginal utility does not hold for Fiona.arrow_forwardThe Brady family have a weekly budget of €200 to be spent on Food (F) and Other Goods (OG), which are initially equally priced at €10 and €20 per unit, respectively. Given recent inflation, the government has concerns about the ability of large families to afford an adequate diet for children. Due to this, the government announces that when Food consumption exceeds 12 units, the government will subsidise food consumption so that the price per subsequent unit will be €5 for any family. With Food on the horizontal axis, show the family’s pre and post-scheme budget line. Can we definitively determine the family’s utility maximising consumption bundle as a result of the government scheme?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you