quanda07 - Chapter 7 1. The following information describes...

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Practice Questions to accompany Mankiw & Taylor: Economics 1 Chapter 7 1. The following information describes the value Lauren Landlord places on having her five houses repainted. She values the repainting of each house at a different amount depending on how badly it needs repainting. a. Plot Lauren Landlord's willingness to pay in Exhibit 1. Exhibit 1 Answer: See Exhibit 6. Exhibit 6
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Practice Questions to accompany Mankiw & Taylor: Economics 2 b. If the price to repaint her apartments is €5000 each, how many will she repaint? What is the value of her consumer surplus? Answer: One apartment painted. €5000 – €5000 = 0, therefore she has no consumer surplus. c. Suppose the price to repaint her apartments falls to €2000 each. How many apartments will Lauren choose to have repainted? What is the value of her consumer surplus? Answer: Four apartments painted. (€5000 – €2000) + (€4000 – €2000) + (€3000 – €2000) + (€2000 – €2000) = €6000 of consumer surplus. d. What happened to Ms. Landlord's consumer surplus when the price of having her apartments repainted fell? Why? Answer: Her consumer surplus rose because she gains surplus on the unit she would have already purchased at the old price plus she gains surplus on the new units she now purchases due to the lower price. 2.
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This note was uploaded on 07/06/2009 for the course BUS BAM303 taught by Professor Na during the Spring '09 term at 東京大学.

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quanda07 - Chapter 7 1. The following information describes...

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