... not like.
3. Explain why two indifference curves cannot intersect.
Chapter 3: Consumer Behavior
The explanation is most easily achieved with the aid of a graph such as Figure 3. 3,
which shows ... the index will be lower, or understated.
Chapter 3: Consumer Behavior
23
PART II
PRODUCERS, CONSUMERS, AND COMPETITIVE MARKETS
CHAPTER 3
CONSUMER BEHAVIOR
QUESTIONS FOR REVIEW...
... Q
2
. See Figure 2.2.c.
D
1
P
1
P
2
S
Price
Quantity of 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, ... divided
by the percentage change in the price. The elasticity of demand for corn flakes is
−
+
=−
6
3
2
. This is equivalent to saying that a 1% increase in price leads to a 2%
decrea...
... profit-maximizing quantity. Eventually, profits fall to zero,
leaving no incentive for more firms to enter.
3. Some experts have argued that too many brands of breakfast cereal are on the market.
Give an ... of the firm that is limiting its sales.
Chapter 12: Monopolistic Competition and Oligopoly
1 93
5. In the Stackelberg model, the firm that sets output first has an advantage. Expla...
... a conclusion derived
from positive economic analysis of the policy.
Chapter 1: Preliminaries
3
b. Gasoline rationing is a policy under which more people are made worse off
than are made ... rationing
is without making a value judgment about the desirability of the rationing
policy.
3. Suppose the price of unleaded regular octane gasoline were 20 cents per gallon
higher in New .....
... For
both types of goods, normal and inferior, we still assume that more is preferred to
less.
3. Explain whether the following statements are true or false.
a. The marginal rate of substitution ... elasticity estimates
the elasticity over a range of prices.
¶
Chapter 4: Individual and Market Demand
43
b. The level of utility increases as an individual moves downward along the
demand...
...
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 15% and
... workers. Eventually, there will be enough workers and there
Formatted: Font: Times New
Roman, 13 pt
Formatted: Space Before: 1.2 line,
After: 1.2 line, Line spacing: 1.5
lines
Formatted: Bullets ...
will be no more gains from specialization. At this point, the marginal
product will diminish.
3. Why does production eventually experience diminishing marginal returns to
labor in the short
... time would be worth in its next best use.
3. Please explain whether the following statements are true or false.
Formatted: Font: Times New
Roman, 13 pt
Formatted: Space Before: 1.2 line,
After: ... a case with constant
product-specific returns to scale and multiproduct economies of scope.
13. Is the firm’s expansion path always a straight line?
Formatted: Bullets and Numbering
...
Formatted: Font: Times New
Roman, 13 pt
Formatted: Space Before: 1.2 line,
After: 1.2 line, Line spacing: 1.5
lines
Chapter 8: Profit Maximization and Competitive Supply
1 03
minimize cost. Thus, the ... and the firm will earn zero
profit, so that any level of output where MC>AC is not possible.
3. In long-run equilibrium, all firms in the industry earn zero economic profit. Why
is...
... quantity. Consumers capture all
decreases in total revenue. Therefore, no deadweight loss occurs.
3. How can a price ceiling make consumers better off? Under what conditions might
it make them