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How would the answer to the Challenge Solution change if we used the marginal product of labor rather than the average product of labor as our measure of labor.
Was this technological progress neutral? In a figure, show how these technological changes affected isoquants.
Does her production process necessarily illustrate decreasing returns to scale or diminishing marginal returns to labor?
If the output of the production process is measured as the weight of a projectile delivered, how does the amount of capital needed vary with output?
Draw a diagram with labor services on one axis and capital services on the other. Draw a circle in the middle of this figure.
During his first year at school, Ximing buys eight new college textbooks at a cost. Is Ximing better off, the same, or worse off after the price change? Why?
Under what conditions does the income effect reinforce the substitution effect? Under what conditions does it have an offsetting effect?
Does he view an opera performance as an inferior or a normal good? Why? In a diagram, show a possible income-consumption curve for Don.
Illustrate how an increase in your parents' income affects their allocations between bequests to you and all other goods (fun) in two related graphs.
Does the substitution effect cause her to buy more or less clothing? Explain. (If the direction of the effect is ambiguous, say so.)
Under what circumstances would people find index to be as useful as or more useful than Consumer Price Index in measuring how their true cost of living changes.
Ann has the usual-shaped indifference curves. Will Ann change the amount of ice cream and books that she buys this year? If so, explain how and why.
By how much will a CPI for these two goods differ from the true cost-of-living index?
Illustrate that the Paasche cost-of-living index underestimates the rate of inflation when compared to the true cost-of-living index.
Show how much education and all other goods she would consume with the educational voucher or with a cash payment of V.
Does Prescott's evidence indicate anything about the relative sizes of the substitution and income effects? Why or why not?
Several political leaders, including some recent candidates for U.S. presidency have proposed a flat income tax. Discuss the merits of political leader's claim.
Show how her budget constraint and choice of hours change. Is she unambiguously worse off as a result of this change? Why?
Show how Roy's budget constraint changes. Will he choose to work more than seven hours a day?
The higher-paying job pays w, but he can work at most eight hours. Show how Jerome determines how many hours to work.
After winning the lottery, Joe continues to work the same number of hours each day. What is the income effect of Joe's lottery gains?
Does knowing that the tax was progressive tell us whether a nobleman or a peasant-assuming they have identical tastes-worked more hours?
Draw the total product, average product, and marginal product of labor curves (you will probably want to use two diagrams) for this production.
Based on the information in the application Malthus and the Green Revolution, how did the average product of labor for corn change over time?
What is Ben's marginal productivity of the number of yards he practices? Is there diminishing marginal productivity of practice yards?