Question

(10 points each question). Answer each question as TRUE, FALSE, or UNCERTAIN. Justify your answer. It is recommended that you write answers no more than half a page for each question. 1. The market demand for a good is more inelastic the greater the elasticity of supply of goods for which it is a substitute. 2. All else equal, the price elasticity of demand of a good will be larger when there are more demanders of the good. 3. Holding the nominal income of each consumer constant, an increase in the price of one good holding the price of other goods constant will reduce the consumption of the good for which the price increased as long as that good is a normal good for each consumer. 4. Assume a household produces commodities Z1 and Z2, with utility defined over these commodities. Assume the household production functions are: Z1 = ax1 and Z2 = bx2g(Z1) where a and b are constants, the x's are market goods with fixed prices, and dZ2/dZ1 < 0. For example, Z1 may be smoking and Z2 health. A rise in non-earnings income of this consumer would raise Z2 as well as Z1 if both commodities are superior commodities when their shadow prices of production are held constant. (Definition: Superior good, as a type of normal goods, is a good the demand for which is income elastic, so that consumers spend a larger fraction of income on it as income rises.) 5. Popular bands and musicians often price their tickets below the market clearing price and, as a result, such tickets sell out very quickly. In this case, they are not profit maximizing. 6. If the firm is cost-minimizing and is at an optimum, the marginal cost is the same whether it changes only labor, only capital, or both. 7. If a factor is inferior, then the factor demand may increase as the factor price increases. 8. With constant returns to scale, the rate of growth of labor productivity will exceed the rate of growth of total factor productivity when the capital output ratio is rising. 9. Because the relative price of coal has never increased at the rate of interest, coal cannot be an exhaustible resource. 10. The Coase theorem implies that whether rookie professional basketball players are assigned to the teams by a rule—such that teams with worse records in previous years gain exclusive rights to sign the best rookies—or whether teams can bid for rookies does not affect which teams the rookies end up playing for, or the incomes of rookies.

(10 points each question). Answer each question as TRUE, FALSE, or UNCERTAIN. Justify your answer. It is recommended that you write answers no more than half a page for each question.

1. The market demand for a good is more inelastic the greater the elasticity of supply of goods for which it is a substitute.
2. All else equal, the price elasticity of demand of a good will be larger when there are more demanders of the good.
3. Holding the nominal income of each consumer constant, an increase in the price of one good holding the price of other goods constant will reduce the consumption of the good for which the price increased as long as that good is a normal good for each consumer.
4. Assume a household produces commodities Z1 and Z2, with utility defined over these commodities. Assume the household production functions are: Z1 = ax1 and Z2 = bx2g(Z1) where a and b are constants, the x's are market goods with fixed prices, and dZ2/dZ1 < 0. For example, Z1 may be smoking and Z2 health. A rise in non-earnings income of this consumer would raise Z2 as well as Z1 if both commodities are superior commodities when their shadow prices of production are held constant.
(Definition: Superior good, as a type of normal goods, is a good the demand for which is income elastic, so that consumers spend a larger fraction of income on it as income rises.)
5. Popular bands and musicians often price their tickets below the market clearing price and, as a result, such tickets sell out very quickly. In this case, they are not profit maximizing.
6. If the firm is cost-minimizing and is at an optimum, the marginal cost is the same whether it changes only labor, only capital, or both.
7. If a factor is inferior, then the factor demand may increase as the factor price increases.
8. With constant returns to scale, the rate of growth of labor productivity will exceed the rate of growth of total factor productivity when the capital output ratio is rising.
9. Because the relative price of coal has never increased at the rate of interest, coal cannot be an exhaustible resource.
10. The Coase theorem implies that whether rookie professional basketball players are assigned to the teams by a rule—such that teams with worse records in previous years gain exclusive rights to sign the best rookies—or whether teams can bid for rookies does not affect which teams the rookies end up playing for, or the incomes of rookies.

$(10 points each question). Answer each question as TRUE, FALSE, or UNCERTAIN. Justify your answer. It is recommended that you write answers no more than half a page for each question. 1. The market demand for a good is more inelastic the greater the elasticity of supply of goods for which it is a substitute. 2. All else equal, the price elasticity of demand of a good will be larger when there are more demanders of the good. 3. Holding the nominal income of each consumer constant, an increase in the price of one good holding the price of other goods constant will reduce the consumption of the good for which the price increased as long as that good is a normal good for each consumer. 4. Assume a household produces commodities Z1 and Z2, with utility defined over these commodities. Assume the household production functions are: Z1 = ax1 and Z2 = bx2g(Z1) where a and b are constants, the x's are market goods with fixed prices, and dZ2/dZ1 < 0. For example, Z1 may be smoking and Z2 health. A rise in non-earnings income of this consumer would raise Z2 as well as Z1 if both commodities are superior commodities when their shadow prices of production are held constant. (Definition: Superior good, as a type of normal goods, is a good the demand for which is income elastic, so that consumers spend a larger fraction of income on it as income rises.) 5. Popular bands and musicians often price their tickets below the market clearing price and, as a result, such tickets sell out very quickly. In this case, they are not profit maximizing. 6. If the firm is cost-minimizing and is at an optimum, the marginal cost is the same whether it changes only labor, only capital, or both. 7. If a factor is inferior, then the factor demand may increase as the factor price increases. 8. With constant returns to scale, the rate of growth of labor productivity will exceed the rate of growth of total factor productivity when the capital output ratio is rising. 9. Because the relative price of coal has never increased at the rate of interest, coal cannot be an exhaustible resource. 10. The Coase theorem implies that whether rookie professional basketball players are assigned to the teams by a rule—such that teams with worse records in previous years gain exclusive rights to sign the best rookies—or whether teams can bid for rookies does not affect which teams the rookies end up playing for, or the incomes of rookies.$

Added by Billy O.

Question

Please give Ace some feedback