4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each....

4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line

A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new graph. Label it “budget line B.” Once again, preferences are perfect complements: utility = min{X,Y}. Both are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. C. Herman Cain ran for president in the year 2000. He made the following policy proposal: Reduce the federal income tax, and make up the federal revenue shortfall with a new national sales tax charged, in addition to the state and local sales tax. Total federal tax revenue would be unchanged. Herman Cain stated that the average person would be better off. Use the objective of the consumer (utility maximization, as illustrated in parts A and B) to explain and evaluate if Herman Cain was right or wrong.

Expert Solution

Rahul Sunny answered 2 years ago

4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each....

4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a...

A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw...

A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new...

A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw...

A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each. Draw the budget line. Label it “budget line A.” Preferences are perfect complements: utility = min{X,Y}. Both X and Y are normal goods. Numerically solve the consumer’s budget choice. Label it on the diagram, including the indifference curve, and all solved numbers. B. A consumer has $400. Good X costs $6 each. Good Y costs $7 each. Draw a new budget line, on a new...

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A consumer has budgeted a total of K100 to spend on two goods, X and Y. She likes to consume a unit of good X in combination with a unit of good Y.

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Consider a consumer with the utility function U(X, Y) = X^2 Y^2 . This consumer has...

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Consumer A's marginal benefit for good X is MB=10-2X, and consumer B's marginal benefit is MB=8-X....

Consumer A's marginal benefit for good X is MB=10-2X, and consumer B's marginal benefit is MB=8-X. The marginal cost for producing X goods is MC=6+3X. a Graph of the marginal benefits, market marginal benefits, and marginal cost curves of goods X for public goods. Find balanced production, the payment price of each consumer in a manner. b Graph the marginal benefits, market marginal benefits, and marginal cost curves of goods X for private goods. Find balanced production, the payment price...

Suppose a consumer has a utility function given by u(x, y) = x + y, so...

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4. A. A consumer has $360. Good X costs $4 each. Good Y costs $8 each....

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