PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 3, Problem 5RQ
To determine

The usage of ‘smart for one but dumb for all’.

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The U.S. government spends over $74 billion on its Supplemental Nutrition Assistance Program (SNAP) to provide millions of Americans with the means to purchase food. Beneficiaries use an Electronic Benefits Transfer (EBT) card to transfer their government benefits from a federal account to a retailer account. The funds on an EBT card cannot be sold for cash or used to purchase nonfood items. The average SNAP benefit is about $284 per month. Suppose that, in the absence of SNAP, the average consumer must divide $600 in monthly income between food and “all other goods” such that the following budget constraint holds: $600 = $12A + $4F, where A is the quantity of “all other goods” and F is the quantity of food purchased. Using the vertical axis for “all other goods,” draw the consumer’s budget line in the absence of SNAP. What is the market rate of substitution between food and “all other goods”? On the same graph, show how SNAP alters the average consumer’s budget line. Would this…
Ahmed is an agent for Bader for maintaining Bader’s antique cars collection, including sale and purchase of antique cars. Ahmed has had this position for several years, but recently Ahmedhas developed a cocaine habit. He recently sold one of Bader’s cars and kept some of the money himself to buy some cocaine. Soon thereafter, Ahmed was declared bankrupt. The government then notified Ahmed that he had sold the maximum allowable number of cars in a year without getting a dealer’s license. Shortly thereafter, Bader was on a secluded island and died, which no one knew about until 2 weeks later. Discuss the effect of these events on the existence of the agency.
Mika earns $379 per week which she spends entirely at the grocery store, purchasing either food or alcohol. The price of food is $1/unit, while the price of alcohol is $4/unit. Mika receives an additional $50/week in food stamps that can only be only be used to buy food at the grocery store (so, this money could be used to buy food but NOT alcohol). Mika knows someone who will give her cash in exchange these food stamps at a rate of $0.50 in cash for every $1 in food. stamps. Cash, of course, can be used to buy either food or alcohol. What is the vertical coordinate of the vertical intercept of Mika's budget constraint if she were to graph quantity of food on the horizontal axis and quantity of alcohol on the vertical axis? (Note: The answer may not be a whole number, so round to the nearest hundredth)
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