Exam 1: Supply, Demand, Balancing Benefits, Costs, Principles and Preferences

If the demand for a good increases a the same time the supply of the good decreases, what happens to equilibrium price and quantity?

Harriet enjoys watching both American Idol and Desperate Housewives on television. Her preferences correspond to the utility function U(A,D) = 2A + 4Ö D, where A stands for the number of hours she watches American Idol and D is the number of hours she watches Desperate Housewives.a) How would Harriet rank the following alternatives: 4 hours of American Idol and 2 hours of Desperate Housewives, 2 hours of American Idol and 4 hours of Desperate Housewives and 3 hours of American Idol and 3 hours of Desperate Housewives? b) Suppose that one week, Desperate Housewives is not shown, but there is a two-hour American Idol special (instead of the usual one-hour program). Is Harriet better off or worse off? Explain.c) Would Harriet's preferences change if her utility function was expressed as U(A,D) = 2A + 4Ö D + 6? Why or why not? ch04 Key

-According to Figure above, which of the following statements is true?

Using a graph, explain how an increase in technology will affect the equilibrium price and quantity of DVD players. Again using a graph, explain what happens in the market for video cassette recorders.

Suppose that you can schedule a worker for up to 10 hours per day. The total benefit and total cost functions are B(H) = 120?H and C(H) = 200H. The corresponding formulas for marginal benefit and marginal cost are MB(H) = 600/?H and MC(H) = 200. How many hours should you schedule the worker?

Using a carefully-labeled graph, explain the concept of declining marginal rate of substitution. Why would we expect indifference curves to exhibit this characteristic?

Suppose that an increase in oil prices causes the supply curve of gasoline to shift. Using a graph, illustrate the resulting changes in equilibrium price and quantity in both the short run and the long run.

Suppose the demand function for cable TV service is given by Q_CTV = 15 - 0.25xP_CTV + 0.0005xM + 0.3xP_STV, where Q_CTV is the quantity of cable TV demanded (thousands of households), P_CTV is the price of cable TV, M is income and P_STV is the price of satellite TV service. If consumers' income is $50,000 and the price of satellite TV service is $90, then the demand curve for cable TV would be given by

What is the difference between a change in demand and a change in the quantity demanded of a good? Illustrate you answer using carefully labeled graphs.

Refer to carefully-labeled diagrams to explain each of the following: a) Indifference curves are thin. b) Indifference curves do not slope upward. c) Indifference curves from the same family do not cross.

Consider the relationship given by Q_Cars = 100 + 4xP_Cars - 2xP_Steel - 2xP_Workers, where is the quantity of cars (in thousands), is the price of cars and P is the wage earned by autoworkers. If the price of steel is $10 per unit and the price of workers (the wage) is $20, what is the supply curve for cars?