True or False or Uncertain with one line explanation. a) Mutton and wool are pro

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True or False or Uncertain with one line explanation. a) Mutton and wool are produced jointly from sheep (in fixed proportions). The Surgeon General announces that eating mutton reduces the likelihood of develop- ing heart disease. If people follow this advice, then the price of mutton will rise the price of sheep will rise, and the price of wool will fall (b) Originally, Jerry buys 12 gallons of wine and 2 kegs of beer when the price of wine is pu $10 and the price of beer is po $30. His budget for alcohol consumption is S180. The government just passed a tax on wine which raises the price of wine to p $15, without altering the price of beer. As a consequence, Jerry buys 6 gallons of wine but increases his consumption of beer to 3 kegs. Jerry can be better off (have higher utility than before), even though his wine consumption has fallen, because he is now drinking more beer. Jerry can also be worse off. Therefore, the net effect of the tar on Jerrys utility is ambiguous. Perfectly competitive firms should shut down in the short-run if their economic profits (i.e., short-run revenues minus total short-run costs) are less than zero. (d) For both perfectly-competitive and monopolistic firms, marginal revenue is less than the price per unit. (e) The government of Ameristan is considering a new welfare program. Under this program, individuals with no wage income would receive $5,000 per year from the government. Individuals who earn more than $0 in wages would see their welfare payment fall $1 for every $2 in earnings. A person earning $5,000 in wages, for example, would receive $2,500 in welfare. Persons earning $10,000 or more in wages would not receive any welfare payments. Jessica works 2,000 hours year and earns $11,000 in wages in the absence of the welfare progr welfare program is implemented, Jessica will work the same number of hours (Note: full credit requires a sketch of Jessica's budget constraint.) per am. If the ) In a perfectly competitive, constant-cost industry, the imposition of a tar of $2/unit will cause the buyer's total transaction price (price paid to seller plus tar paid to overnment) to rise by less than $2 in the long run. In a perfectly competitive, increasing-cost industry, the imposition of a tar of S2/unit will cause the buyer's total transaction price to increase by $2 in the long run. (Note: you can assume the demand curve is not perfectly elastic.)

Explanation / Answer

Ans. False because now less wool will be produced due to killing of sheep

B false. His budget line shifts inwards so he can reach lower indifference curve

C false. Only if p<Avc

D false. Under perfect competition price=MR

E True because her income is greater than 10000 and no payments (welfare) are paid

F false

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