Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 18

Consider the function Y = X • Z, X, Z ? 0.
a. Graph the Y = 4 contour line for this function. How does this line compare to the Y = 2 contour line in Figure? Explain the reasons for any similarities.
b. Where does the line X + 4Z = 8 intersect the Y = 4 contour line? (Hint: Solve the equation for X and substitute into the equation for the contour line. You should get only a single point.)c. Are there any points on the Y = 4 contour line other than the point identified in part b that satisfy this linear equation? Explain your reasoning.
d. Consider now the equation X + 4Z = 10. Where does this equation intersect the Y = 4 contour line? How does this solution compare to the one you calculated in part b?
e. Are there points on the equation defined in part d that would yield a value greater than 4 for Y? (Hint: A graph may help you explain why such points exist.)f. Can you think of any economic model that would resemble the calculations in this problem?
FIGURE U.S. Subsidies Reduce African Exports
U.S. farm subsidies reduce the world price of this crop from P* to P**. Exports from this African country fall from QS ? QD to Q'S ? Q'D.