1.Suppose that the government puts a tax of 15 cents a gallon on gasoline and then later decides to put a subsidy on gasoline at a rate of 7 cents a gallon. What net tax is this combination equivalent to? 2. Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line? 3.If the income of the consumer increases and one of the prices decreases at the same time, will the consumer necessarily be at least as well-off? 4.If we observe a consumer choosing (x1, x2) when (y1, y2) is available one time, are we justified in concluding that (x1, x2) > (y1, y2)? 5.Consider a group of people A, B, C and the relation “at least as tall as,” as in “A is at least as tall as B.” Is this relation transitive? Is it complete? 6.Take the same group of people and consider the relation “strictly taller than.” Is this relation transitive? Is it reflexive? Is it complete? 7.A college football coach says that given any two linemen A and B, he always prefers the one who is bigger and faster. Is this preference relation transitive? Is it complete? 8.Explain why convex preferences means that “averages are preferred to extremes. 9.If good 1 is a “neutral,” what is its marginal rate of substitution for good 2?
1.Suppose that the government puts a tax of 15 cents a gallon on gasoline and then later decides to put a subsidy on gasoline at a rate of 7 cents a gallon. What net tax is this combination equivalent to?
2. Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line?
3.If the income of the consumer increases and one of the prices decreases at the same time, will the consumer necessarily be at least as well-off?
4.If we observe a consumer choosing (x1, x2) when (y1, y2) is available one time, are we justified in concluding that (x1, x2) > (y1, y2)?
5.Consider a group of people A, B, C and the relation “at least as tall as,” as in “A is at least as tall as B.” Is this relation transitive? Is it complete?
6.Take the same group of people and consider the relation “strictly taller than.” Is this relation transitive? Is it reflexive? Is it complete?
7.A college football coach says that given any two linemen A and B, he always prefers the one who is bigger and faster. Is this preference relation transitive? Is it complete?
8.Explain why convex preferences means that “averages are preferred to extremes.
9.If good 1 is a “neutral,” what is its marginal rate of substitution for good 2?
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