Exam 5: Consumer Welfare and Policy Analysis

Joe's demand for spring water can be represented as p = 10 - Q (where p is measured in $/gallon and Q is measured in gallons).He recently discovered a spring where water can be obtained free of charge.His consumer surplus from this water is

Job is a smoker.He has a utility function for cigarettes smoked in bars (q₁)and a composite good (q₂)given by U(q₁,q₂)= 10q₁.⁵ + q₂ Job's income is $100 and faces prices p₁ = 5 and p₂ = 1.The government is planning to ban smoking in bars.Compute the compensating variation.

Empirical studies have found that the labor supply curves for most parts of the population are

For the following, please answer "True" or "False" and explain why. -Consumer surplus from a given purchase is the difference between what one was willing to pay for that purchase and what was actually paid.

The graph below shows George's indifference curves and budget lines.From A to B,we can Conclude

For the following, please answer "True" or "False" and explain why. -Consumers who are more sensitive to changes in price suffer a greater loss of consumer surplus from any given price increase.

A tax cut that raises the after-tax wage rate will most likely result in more hours worked if

If a person supplies fewer hours of labor in response to a wage increase,then

A consumer has the quasi-linear utility function U(q₁,q₂)= 64q₁¹/² + q₂ Assume p₂ = 1 and Y = 100.Find the consumer's compensating and equivalent variations for an increase in p₁ from 1 to 2.

Ian views playing Wartcraft and drinking soda as perfect complements (one soda with one hour of playing Wartcraft).Currently,sodas are $1 each and Wartcraft costs $1 per hour.Ian has $12 of income. a.Compute Ian's Compensating Variation if the price of Wartcraft rises to $2. b.Compute Ian's Equivalent Variation if the price of Wartcraft rises to $2. c.Compute Ian's change in Consumer Surplus if the price of Wartcraft rises to $2.

Julia is offered two options of government subsidies: $100 food stamp or $100 cash.If she receives $100 cash,she will spend $80 on food.If equivalent evaluation is measured for the situation when only $100 is available to her,the equivalent evaluation is

A backward-bending labor supply curve could possibly imply which of the following cases?

For the following, please answer "True" or "False" and explain why. -Kisa consumes the same amount of cigarettes each week regardless of her income (assume that her income is sufficiently large such that the quantity is affordable).The Equivalent Variation equals the Compensating Variation.