... Chapter 6: Production
74
CHAPTER 6
PRODUCTION
QUESTIONS FOR REVIEW
1. What is a production function? How does a ... measures the extra
output produced by an extra unit of labor
all else the same.
Chapter 6: Production
76
The point at which the average product begins to decline is the point where
average ... gains to
specialization, such t
Deleted: hat with more
Deleted: wor...
... unaffected
by the tax-rebate program, because in this case the household pays 0.20*800=$ 160
in taxes and receives $ 160 as an annual tax rebate. The two effects would cancel
each other out. To the extent ... out. The equilibrium quantity and price will
increase.
Chapter 4: Individual and Market Demand
46
c. a cut in the industry’s costs of producing domestic clothes that is passed o...
... economic
terms.
Deleted: not
Deleted:
p
ossesses certain
Chapter 7: The Costs of Production
86
such as care of a child or elderly person at home, which would have had a
value to those receiving ... until it is equal to the ratio of the input prices (rental rate on capital
divided by wage rate).
6. Why are isocost lines straight lines?
The isocost line represents all possible combi...
... what could be earned elsewhere,
then the owner is indifferent to staying in business or exiting.
6. At the beginning of the twentieth century, there were many small American
automobile manufacturers. ... in scale. Doubling inputs will still
Chapter 8: Profit Maximization and Competitive Supply
1 06
yield double output, but because of rising costs, the firm cannot offer
increasing amou...
... welfare.
Price
Quantity
P
1
P
2
Consumer Surplus
D
Q
1
Q
2
Figure 11.3
161
Chapter 11: Pricing with Market Power
162
4. Give some examples of third-degree price discrimination. Can third-degree ... only one eye doctor.
Are senior citizens more likely to be offered discount prices for dental exams or for eye
exams? Why.
The dental market is competitive, whereas the eye doctor is a...
... U.S. automobile priced in dollars requires fewer
yen.
6. The price of long-distance telephone service fell from 40 cents per minute in 19 96
to 22 cents per minute in 1999, a 45-percent (18 cents/40 ... 10-percent over this period. What happened to
the real price of telephone service?
Let the CPI for 19 96 equal 1 and the CPI for 1999 equal 1.1, which reflects a
10% increase in the ov...
... support the conclusion that
demand is completely price inelastic.
S
19 76
Price
Quantity
S
19 86
S
19 96
D
19 96
D
19 86
D
19 76
Figure 2.10
11. Suppose the demand curve for a product is given ... Butter
Q
1
Q
2
D
2
Figure 2.2.c
3. If a 3-percent increase in the price of corn flakes causes a 6- percent decline in the
quantity demanded, what is the elasticity of demand?...
... units of good 2 for one unit of good 1. If the MRS at the
current bundle is 6, then the consumer is willing to trade 6 units of good 2 for one
unit of good 1. Since the two slopes are not equal ... is always willing to trade the same
number of units of one good in exchange for the other.
6. Explain why an MRS between two goods must equal the ratio of the price of the goods
for the .....
... the payoff is the loss of the
consumer’s life.
Chapter 5: Uncertainty and Consumer Behavior
66
5. Why do people often want to insure fully against uncertain situations even when
the premium ... useful
measure of variability than the range.
Chapter 5: Uncertainty and Consumer Behavior
65
3. George has $5,000 to invest in a mutual fund. The expected return on mutual
fund A is ......
... leave some of their acreage idle. This reduces supply,
driving up the price of wheat or corn.
6. Suppose the government wants to increase farmers’ incomes. Why do price
supports or acreage