Question
In: Economics
Consider the following equation: W =P(1−u) Suppose that the markup of goods prices over marginal cost...
Consider the following equation: W =P(1−u)
Suppose that the markup of goods prices over marginal cost is 5%, the real wage is 0.952 and the natural rate of unemployment is 4.8%. What happens to the natural rate of unemployment when the markup of prices over costs increases to 10%? Graph the result and explain the logic of your answer.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
1. Consider the preferences of an individual over two goods, x and y, with prices px...
1. Consider the preferences of an individual over two goods, x
and y, with prices px and py and income
I.
(a) If the individual's preferences can be represented by the
utility function u(x,y) =2x1/2 + y, what is the
marginal rate of substitution? What does this MRS imply about how
this consumer would trade y for x? Are the underlying preferences
homothetic (explain)? Graphically illustrate a typical indifference
curve and explain how you know the shape.
(b) If the...
Suppose that Elizabeth has a utility function U= (or U=W^(1/3) ) where W is her wealth...
Suppose that Elizabeth has a utility function U= (or U=W^(1/3) )
where W is her wealth and U is the utility that she gains from
wealth. Her initial wealth is $1000 and she faces a 25% probability
of illness. If the illness happens, it would cost her $875 to cure
it.
What is Elizabeth’s marginal utility when she is well? And when
she is sick? Is she risk-averse or risk-loving?
What is her expected wealth with no insurance?
What is...
1) Suppose inverse demand equation, P = 14 - Q, and marginal revenue, MR = 14...
1) Suppose inverse demand equation, P = 14 - Q, and marginal
revenue, MR = 14 -2Q, and marginal cost, MC = 2 + Q. The price that
the profit maximizing monopolist sets is $_ per unit. ____
2) Suppose inverse demand equation, P = 14 - Q, and marginal
revenue, MR = 14 -2Q, and marginal cost, MC = 2 + Q. What quantity
does a profit maximizing monopolist produce? _____
1. Marginal cost __________ over the range of increasing marginal returns and ___________ over the range...
1. Marginal cost __________ over the range of increasing
marginal returns and ___________ over the range of diminishing
marginal returns.
a) increases; decreases
b) decreases; increases
c) is constant; decreases
d) increases; is constant
2. The marginal cost curve intersects the average variable cost
curve at:
a) its lowest point.
b) its maximum.
c) its end point.
d) no point; the curves don't intersect.
3. Marginal revenue:
a) is the slope of the average revenue curve.
b) equals the market...
Marginal Cost and Marginal Benefit Suppose you are given a benefit equation as B(t) = -3t2...
Marginal Cost and Marginal Benefit
Suppose you are given a benefit equation as B(t) =
-3t2 + 15t + 160 and cost equation as C(t) =
t2 -5t + 60, where t = time in hours. Find a NB
equation.
b. Solve for MB, MC, and find a MNB expression.
c. Find the optimal amount of time you should spend on the
activity and the value of NB associated with that optimal time.
d. If you were given the following...
Suppose that the firms’ mark-up over costs is 5% and the wage-setting equation is W =...
Suppose that the firms’ mark-up over costs is 5% and the
wage-setting equation is W = P (1 − u) where u is the unemployment
rate.
(a) Suppose the mark-up of prices over costs increases to 10%.
What happens to the natural rate of unemployment? Explain the logic
behind the answer and the sense in which there is nothing “natural”
about the natural rate of unemployment.
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20.
a. Suppose the firm applies the two-part pricing strategy.
Compute the fixed fee, variable (per unit) fee, output, revenue and
cost associated with this pricing.
b. What type of businesses should consider implementing the
two-part pricing strategy? Please explain.
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20. Now suppose the firm decides
to offer quantity discount by selling the product in bundles of 10
units.
a. What is the maximum price that the firm can charge for the
first 10 units, for the second 10 units, and for the third 10
units? Now compute the revenue and cost of selling the three
bundles (a total 30 units)...
Suppose a business firm faces the following demand equation: Q = 40 – 0.5P. Marginal cost...
Suppose a business firm faces the following demand equation: Q =
40 – 0.5P. Marginal cost is MC = $20.
b. What type of businesses should consider implementing the
two-part pricing strategy? Briefly explain your answer
a. Suppose the firm applies the two-part pricing strategy.
Compute the fixed fee, variable (per unit) fee, output, revenue and
cost associated with this pricing
Suppose U is uniform on (0,1). Let Y = U(1 − U). (a) Find P(Y >...
Suppose U is uniform on (0,1). Let Y = U(1 − U). (a) Find P(Y
> y) for 0 < y < 1/4. (b) differentiate to get the density
function of Y . (c) Find an increasing function g(u) so that g(U )
has the same distribution as U (1 − U ).
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