Compare the following two pairs of goods:

• Coke and Pepsi
• Skis and ski bindings

In which case do you expect the indifference curves to be fairly straight? In which case do you expect the indifference curves to be very bowed?

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her$50,000 per year job as an accountant.

Define opportunity cost

Rent control causes larger shortages in the ____ run because over that time horizon, supply and demand are ____ elastic.

a. long; more

b. long; less

c. short; more

d. short; less

Compare the following two pairs of goods:

Coke and Pepsi

Skis and ski bindings

In which case do you expect the indifference curves to be fairly straight? In which case do you expect the indifference curves to be very bowed?

Compare the following two pairs of goods: • Coke and Pepsi • Skis and ski bindings a. In which case are the two goods complements? In which case are they substitutes? b. In which case do you expect the indifference curves to be fairly straight? In which case do you expect the indifference curves to be very bowed? c. In which case will the consumer respond more to a change in the relative price of the two goods?

One reason why petrol has a low price elasticity of demand is because it is complementary to motor vehicles (if you have a car you have to purchase petrol). True or False

Compare the following two pairs of goods:

Coke and Pepsi

Skis and ski bindings

In which case are the two goods complements? In which case are they substitutes?

Identify and explain the effect of the following on the market price.

• The government sets a price floor above the equilibrium price.

If the cross price elasticity of demand for 2 goods is positive this implies that the 2 goods are:

a) Complements

b) Inferior

c) Normal

d) Substitutes

Jennifer divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

a. Show the effect of the frost on Jennifer's budget constraint.

b. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

c. Show the effect of the frost on Jennifer's optimal consumption bundle assuming that the income effect outweighs the substitution effect for croissants.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

Show the effect of the frost on Maya's optimal consumption bundle assuming that the substitution effect outweighs the income effect for croissants.

Maya divides her income between coffee and croissants (both of which are normal goods). An early frost in Brazil causes a large increase in the price of coffee in the United States.

Show the effect of the frost on Maya's budget constraint.

A manufacturer has found that marginal cost is $(0.1 q+1) e^{0.03 q}$ dollars per unit when $q$ units have been produced. The total cost of producing 10 units is $\$ 200$. What is the total cost of producing the first $20$ units?

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A) A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost.

B) A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

C) For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.

D) For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.