ECO200Y1 Midterm: ECO200Y1 Term Test 2 2014 Winter Solutions
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ECO200Y1 Full Course Notes
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There are 5 questions of unequal value: yes or no, jamie"s work- leisure decisions, franny"s two-period choices, uncertainty of print production, shaq"s firm, multiple choice. Be sure to show all steps in your work for a full grade. Yes or no (10 marks) (10) for each of the statements below, indicate if you agree (yes) or disagree (no). Select the best answer, keeping in mind, of course, the assumptions and models we have developed in class. a) For wanda the worker, leisure is a normal good. If her substitution effect is less than her income effect, her labour supply schedule is positively-sloped. For a positively-sloped labour supply, se > ie. U(ev) > p1*u(o1) + p2*u(o2) ev = p1*o1 +p2*o2 o = outcome or payoff. Yes* no: wild willy is a crazy driver. He knows that he has a high probability of crashing his rental car. The rental company offers insurance that would pay the costs of repair.
