Problems for Section 222 1
1. If the marginal product of labor is 0, output would not have fallen at all. If labor's MP was less than the wage, output would have fallen by less than the wage this relies on the fact that the change 5 million out of several hundred million was small see Problem 4. If labor's MP equaled the wage, output would have fallen by the amount of the wages paid to workers killed. On this evidence, there was no surplus labor in India. 3. True. With rising marginal product at any rate for a firm...
Problems for Section 171 1
1. Most of the answer is high school algebra. Two points on the curve are 219 units of money relative to 100 as the world price and 5 million pounds and 112.5 units of money and 16 million pounds. The demand curve, if straight, takes the general form Q D dP. These points imply that the slope, b, was 16 5 219 1 12.5 0.1033. One must keep this many digits to keep the rounding error small. Taking either pair of numbers yields the intercept, D, by D Q bP 1 6 0.10 112.5 27.62. The demand curve in...
The Economics of Ethics
What to Read For What is positive economics What is normative economics Should economists make moral judgments about the economy What is laissez-faire Why might laissez-faire be a Good Thing How do you show this with a utility possibility curve What is utilitarianism What is the bliss point and how is it related to the laissez-faire point How can you show tastes for equality What is an egalitarian Why Bother with People are not satisfied with merely understanding how the economy...
Equimarginality How the Firm Produces What It Produces at Minimum Cost
What to Read For How does a firm decide how to allocate internally How much does it take from each plant What is the Principle of Equimarginality Is the average cost of each plant relevant What is the don't-do-it-yourself principle 14 David Landes, The Unbound Prometheus Technological Change and Industrial Development in Western Europe from 1750 to the Present Cambridge Cambridge University Press, 1969 , p. 132. The idea that profit is at a maximum when marginal benefit is equal to marginal...
V
Q Suppose that an economy produces and consumes two goods, an energy-intensive good and all others. The sages of the community determine that too much of the energy-intensive good is being produced and order its production cut. Illustrate how income declines in a diagram of the community's production possibility curve and indifference curves. A The community starts at Start but see the comment following and refer to Figure 9.7 . It finishes at Finish, the edict requiring that the amount of the...
Problems For Section 11
o 1. Suppose that bread and housing must be paid for in three ways money, ration coupons, and time spent waiting. To get, for example, a loaf of bread one must pay 10 pence, hand over 3 ration coupons, and stand in line 2 hours. To buy a house, likewise, one must spend a specified amount of money, hand over ration coupons, and spend time looking for the house. a. Draw the three budget lines for bread and housing facing Steve Jones. What is the relevant budget constraint along which he can...
J2 The Shape of Indifference Curves
What to Read For what does an indifference curve usually look like What are the extremes within which the shape of a typical indifference curve must fall What does an indifference curve between two perfect complements look like Between two perfect substitutes When two goods are complements, does the pricing of either good alone matter to the consumer Can the prices of substitutes vary relative to each other What is the marginal rate of indifferent substitution, or the marginal valuation How...
Exercises For Section 21
1. Describe the effect on Zecher's choice of a combination of corn and books of a. A fall in the price of corn. c. A decline in his desire to read. 2. Much of what university professors do has nothing directly to do with their teaching. They do research, attempting to expand our knowledge of economics or of the past or of the chemistry of plastics. Show in an indifference curve diagram a. The indifference curves between teaching and research of the typical professor as contrasted with the...