Principles of Microeconomics 7th Edition solutions

Principles of Microeconomics 7
Jennifer divides her income between coffee and crois-sants (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 Jennifers budget constraint. b. Show the effect of the frost on Jennifers optimal

Principles of Microeconomics 7
Compare the following two pairs of goods:Coke and PepsiSkis and ski bindingsa.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 bow

Principles of Microeconomics 7
You consume only soda and pizza. One day, the price of soda goes up, the price of pizza goes down, and you are just as happy as you were before the price changes.a.Illustrate this situation on a graph.b.How does your consumption of the two goods change? How does your response depend on in-come and su

Principles of Microeconomics 7
Mario consumes only cheese and crackers.a.Could cheese and crackers both be inferior goods for Mario? Explain.b.Suppose that cheese is a normal good for Mario while crackers are an inferior good. If the price of cheese falls, what happens to Marios consumption of crackers? What happens to his consump

Principles of Microeconomics 7
Jim buys only milk and cookies.a.In year 1, Jim earns $100, milk costs $2 per quart, and cookies cost $4 per dozen. Draw Jims budget constraint.b.Now suppose that all prices increase by 10 percent in year 2 and that Jims salary increases by 10 percent as well. Draw Jims new budget constraint. How wou

Principles of Microeconomics 7
State whether each of the following statements is true or false. Explain your answers.a.All Giffen goods are inferior goods.b.All inferior goods are Giffen goods.

Principles of Microeconomics 7
A college student has two options for meals: eating at the dining hall for $6 per meal, or eating a Cup O Soup for $1.50 per meal. Her weekly food budget is $60.a.Draw the budget constraint showing the trade-off between dining hall meals and Cups O Soup. Assuming that she spends equal amounts on both

Principles of Microeconomics 7
Consider your decision about how many hours to work.a.Draw your budget constraint assuming that you pay no taxes on your income. On the same diagram, draw another budget constraint assuming that you pay 15 percent tax.b.Show how the tax might lead to more hours of work, fewer hours, or the same numbe

Principles of Microeconomics 7
Sarah is awake for 100 hours per week. Using one dia-gram, show Sarahs budget constraints if she earns $6 per hour, $8 per hour, and $10 per hour. Now draw in-difference curves such that Sarahs labor-supply curve is upward sloping when the wage is between $6 and $8 per hour, and backward sloping when

Principles of Microeconomics 7
Draw the indifference curve for someone deciding how to allocate time between work and leisure. Sup-pose the wage increases. Is it possible that the persons consumption would fall? Is this plausible? Discuss. (Hint: Think about income and substitution effects.)

Principles of Microeconomics 7
Consider a couples decision about how many chil-dren to have. Assume that over a lifetime a couple has 200,000 hours of time to either work or raise children. The wage is $10 per hour. Raising a child takes 20,000 hours of time.a.Draw the budget constraint showing the trade-off between lifetime consu

Principles of Microeconomics 7
Economist George Stigler once wrote that, according to consumer theory, if consumers do not buy less of a commodity when their incomes rise, they will surely buy less when the price of the commodity rises. Ex-plain this statement using the concepts of income and substitution effects.

Principles of Microeconomics 7
Five consumers have the following marginal utility of apples and pears:Marginal Utility of ApplesMarginal Utility of PearsClaire612Phil66Haley63alex36Luke312 The price of an apple is $1, and the price of a pear is $2. Which, if any, of these consumers are optimizing over their choice of fruit? For