Macroeconomics

Why are isoquants negatively sloped? A) Along a single isoquant, the

Why are isoquants negatively sloped? A) Along a single isoquant, the firm can substitute the use of one input for another while holding the total level of output constant. B) Due to the effects of diseconomies of scale. C) Because the farther the isoquant is from the origin, the higher the level of output. D) […]

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Date: September 10th, 2020

Assume a consumer is currently purchasing a combination of goods, X an

Assume a consumer is currently purchasing a combination of goods, X and Y, that maximizes her utility given her budget constraint, i.e., MRSX,Y = PX/PY. Now assume that there is a decrease in the price of Y. In this case, to once again maximize her utility, the consumer will want to adjust her purchases of […]

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Date: September 10th, 2020

Many analysts have argued that the federal government should stop spen

Many analysts have argued that the federal government should stop spending money on programs such as agricultural price supports and should redirect that spending to such things as improvements in the nation’s roads and bridges. Construct an economic argument that supports this proposed change in policy.   ANSWER Government spending on agricultural price supports amounts […]

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Date: September 10th, 2020

Assume the price of product A increases from $1 to $1.50, while the pr

Assume the price of product A increases from $1 to $1.50, while the price of competing product B increases from $1.50 to $2.00. Based on the information, what we can say about the absolute and relative price differences between the two products and the relative attractiveness of the two products to consumers.   ANSWER Clearly, […]

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Date: September 10th, 2020