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5. (5 points) Social Infrastructure You are interested in estimating the effect of health infrastructure on output per capita, and would like to know if this accounts for cross-country variation in Y/L. Suppose that you only have data on the number of hospital beds per capita as a measure of health infrastructure in different countries. List 2 main reasons why running a regression of Y;/L; on this measure could give biased estimates. What is the likely direction of the bias? (Provide a short explanation.)
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Which one of the following situations is not true? A. Indifference curves slope downwards because MU, >O and MU, >O B. Indifference curve can be vertical straight line if MU > O and MUY = 0 C. Indifference curve can be a horizontal straight line if MUX = 0 and MU, >O D. Indifference curve will be a horizontal straight line if MU, = 0 and MU,
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The two reasons why running a regression Yi/Li on this measure could give biased estimates are as follows:
1) The proxy variable used as a measure of health infrastructure does not covers all the aspects that need to be considered in health infrastructure due to which there might be under or river estimation of the estimators.
2) SInce we are taking cross country data for our analysis there might be a problem of heterogeneity associated with the data.
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indifference curve can be a vertical straight line if MUx>0 and MUy=0. Because when a indifference curve is vertical that means it can for 1 unit of x you need to substitute infinite units of y therefore our marginal utility of x is greater than zero and MUy=0
Q= a(1/p) is a demand function that gives us a unitary elastic demand curve, when we plot the curve using the values of p as 1,2,3,..... etc and assuming that value of a is then we'll get a rectangular hyperbola. And it is the property of the rectangular hyperbola that its demand curve is unitary elastic.
when MR=0 then the price elasticity would be 0 as the curve would be horizontal to the origin. and also by using the relationship that MR= p(1+1/ed). we will get the value of the ed=0 when we put the value of MR =0.
A monopolist buyer for his inputs has for his use no demand curve for the input it uses.
