The CARA and CRRA utility functions are both members of a more general class of utility functions called harmonic absolute risk aversion (HARA) functions. The general form for this function is where the various parameters obey the following restrictions: The reasons for the first two restrictions are obvious; the third is required so that U_ > 0.a. Calculate r (W) for this function. Show that […]

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness? a. A true flat tax. b. A flat sales tax on consumption purchases. c. A progressive tax on income. d. A fixed federal tax of $5,000 that everyone […]

Using the aggregate expenditures model, assume the aggregate expenditures (AE) line is above the45-degree line at full-employment GDP. This vertical distance is called a (an) a. inflationary gap. b. recessionary gap. c. negative GDP gap. d. marginal propensity to consume gap.

Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.80, and the government increases spending by $500 billion. As a result, aggregate demand will rise by a. zero. b. $2,500 billion. c. more than $2,500 billion. d. less than $2,500 billion.

What advantage does eBay’s open bidding provide to sellers? Why? Which two of the following are most clearly common-value auction items: Viper sports cars, electricity, patent licenses, T-bills, antiques, or fine art?

Professor Econsmart teaches a course in principles of economics at a large university. This semester he has decided to enrich his lectures by adding a number of different techniques in addition to the standard lecture format; some of these techniques include: asking students to prepare a topic at home and present it in class, using simulations and “games” to show specific issues and ideas, employing […]

The program for speed control of a three-speed motor conveyor system is shown in Figure 15-52 and described in the text. Prepare an I/O connection diagram and ladder logic program that will simulate its operation. Utilize field devices found on your ControlLogix installation. Enter the program into the controller, and monitor its operation.

How do you think the crisis of 2008 would have been mitigated if there had been no shadow banking sector but only the formal depository banking sector?   Q449: Describe the incentive problem facing the U.S. government in responding to the 2007–2009 crisis with respect to the shadow banking sector. How did the Dodd – Frank Act attempt to address those incentive problems?

Assume business investment spending is $10 billion when the interest rate is 2 percent. If the interest rate increases to 5 percent, investment spending will a. increase to over $10 billion. b. decrease to less than $10 billion. c. remain unchanged. d. remain unchanged until the interest rate reaches 5 percent and then investment spending increases.

7. Autonomous consumption is a. positively related to the level of consumption. b. negatively related to the level of consumption. c. positively related to the level of disposable income. d. independent of the level of disposable income.

The following diagram illustrates the demand curve facing a monopoly in an industry with no economies or diseconomies of scale and no fixed costs. In the short and long run, MC=ATC. Copy the diagram and indicate the following: a. Optimal output b. Optimal price c. Total revenue d. Total cost e. Total monopoly profits f. Total “excess burden” or “welfare costs” of the monopoly (briefly […]

Use the aggregate expenditures model to demonstrate the multiplier effect. How are changes in the MPC, changes in the MPS, and the size of the multiplier related? Answer the following questions: a. What is the multiplier if the MPC is 0? 0.33?0.90? b. Suppose the equilibrium real GDP is $100 billion and the MPC is 4/5. How much will the equilibrium output change if businesses […]

Which parameter indicates the number of transitions of the counter rung? a) Count Up c) Preset b) Package_Counter d) Accum What is the counter’s tag name? a) Count Up c) Preset b) Package_Counter d) Accum

The kingdom of Freedonia is divided into two countries: East Babalu and West Babalu. In an effort to reduce carbon dioxide emissions, the kingdom has enacted a carbon tax on all electricity providers. In East Babalu, a gloomy country with cloudy skies and rain every day of the year, 90 percent of households rely on electricity to power their homes. In West Babalu, a tropical […]

Macroeconomic equilibrium occurs when a. aggregate supply exceeds aggregate demand. b. the economy is at full employment. c. aggregate demand equals aggregate supply. d. aggregate demand equals the average price level.

Which of the following correctly describes the aggregate supply curve? a. A curve that shows the level of real GDP demanded at different possible price levels. b. A curve that shows the level of real GDP produced at different possible price levels. c. A curve that shows the level of quantity sup-plied by firms in a market at different possible prices, such as the supply […]

The Footie Fanatic (FF) always eats his stadium hotdog in a special way; he uses a foot-long hot dog (h) together with precisely half a roll (r), 1 gram of mustard (m), and 2 grams of cheese (c). His utility is a function only of these four items, and any extra amount of a single item without the other items is worthless. a. What is […]

An increase in the price level caused by a right-ward shift of the aggregate demand curve is called a. cost-push inflation. b. supply shock inflation. c. demand shock inflation. d. demand-pull inflation.

Suppose a car wash has 2 washing stations and 5 workers and is able to wash 100 cars per day. When it adds a third station, but no more workers, it is able to wash 150 cars per day. The marginal product of the third washing station is a. 100 cars per day. b. 150 cars per day. c. 5 cars per day. d. 50 […]

In each of the following cases, state whether the monopolist would increase or decrease output: a. Marginal revenue exceeds marginal cost at the output produced. b. Marginal cost exceeds marginal revenue at the output produced.

The law of diminishing marginal utility exists for the first four units of a good if they have marginal utilities of a. 1, 2, 4, 8. b. 8, 4, 1, 2. c. 4, 8, 2, 1. d. 8, 4, 2, 1.

According to Keynesian theory, if equilibrium real GDP is below the full-employment level, then an increase in aggregate demand will result in which of the following changes in equilibrium? a. Real GDP will rise, but the price level will remain constant. b. Real GDP and the price level will both rise. c. Real GDP will remain unchanged but the price level will rise. d. None […]

In a perfectly competitive market, the demand curve for labor a. slopes upward. b. slopes downward because of diminishing marginal productivity. c. is perfectly elastic at the equilibrium wage rate. d. is described by all of the above.

In the short run, an increase in the price level causes which of the following a. A rightward shift in the aggregate demand curve. b. A leftward shift in the short-run aggregate supply curve. c. A rightward shift in the short-run aggregate supply curve. d. A movement upward along the short-run aggregate supply curve.

Prior to deregulation, critics argued that airline safety would suffer. Instead, although the Federal Aviation Administration’s budget was cut following deregulation, the accident rate involving fatalities has fallen. Give a rationale for why the critics’ prediction did not come to pass.

Suppose that a consumer’s utility function for goods x, y and z is expressed according to the Cobb–Douglas utility function Prices are given by Consumer income is given by I= 8. a. Determine the utility maximising quantity of good z consumed. b. Explain why this quantity of good z is optimal? c. Determine the minimum income required for the consumer to purchase product z.

What is the difference between the marginal tax rate and the average tax rate? Explain why a 5 percent sales tax on gasoline is regressive. Ms. Jones has a taxable income of $30,000, and she must pay $3,000 in taxes. Mr. Smith has a taxable income of $60,000. How much tax must Mr. Smith pay for the tax system to be a. progressive? b. regressive? […]

As shown in Exhibit 11, the $1 per pack sales tax on cigarettes raises tax revenue per day totaling a. $5 million. b. $6 million. c. $10 million. d. $15 million.

Which of the following will not shift the aggregate demand curve to the left? a. Consumers become more optimistic about the future. b. Government spending decreases. c. Business optimism decreases. d. Consumers become pessimistic about the future.

Opportunity cost is the a. purchase price of a good or service. b. value of leisure time plus out-of-pocket costs. c. best option given up as a result of choosing an alternative. d. undesirable sacrifice required to purchase a good.