Microeconomics,, 16th Canadian Edition

([email protected]) #1

c. In the market for Y, a technological improvement causes
supply to increase from to causing price to fall from
to Explain what happens to the total value that
consumers place on a given quantity of Y.
d. Explain why the increase in supply leads consumers to
reduce their marginal value of Y even though there has
been no change in their preferences regarding Y (and
thus no shift in the demand curve).
8. Using marginal utility theory, provide an explanation for why
newspaper publishers are prepared to use vending machines that
allow customers to pay for one newspaper and remove several,
whereas candy and soft-drink producers use vending machines
that allow customers to remove only the single product that is
purchased.
9. Many medical and hospital services in Canada are provided at
zero price to Canadians and are financed out of general
government revenues.
a. What would be the marginal value of such services
consumed by each Canadian if the government provided
the necessary resources to satisfy all demand?
b. How does your answer to part (a) relate to the total value
that Canadians probably place on medical services?
c. Suppose the government maintains the zero price on
medical services but restricts the supply to less than the
quantity demanded. What is likely to happen in this
market?
10. The diamond–water paradox is the classic example of the


S 0 S 1 ,
p 0 p 1.
Free download pdf