# Production Possibilities Curve, Absolute and Comparative Advantage, Opportunity Cost, and Marginal Analysis

Size: px
Start display at page:

## Transcription

1 AP Macroeconomics Unit 1 Review Session Production Possibilities Curve, Absolute and Comparative Advantage, Opportunity Cost, and Marginal Analysis 1. Draw a PPC with linear opportunity cost. 2. Draw a PPC that illustrates the law of increasing opportunity cost. Use the figure below to answer Questions What is the opportunity cost of 1 unit of textiles in the US? In Portugal? US: 1T = 1W Portugal: 1T = 1/3W 4. What is the opportunity cost of 1 unit of wine in the US? In Portugal? US: 1W = 1T Portugal: 1W = 3T 5. Assume the two countries have identical resources. a. In which product does the US have an absolute advantage? In which product does Portugal have an absolute advantage? US: wine and textiles (both) Portugal: neither b. In which product does the US have a comparative advantage? In which product does Portugal have a comparative advantage? US: wine Portugal: textiles Fill in the table. Assume that with trade, each country specializes and exports ½ of its production. Without Trade With Trade (Production) With Trade (Consumption) Wine Textiles Wine Textiles Wine Textiles Portugal United States Total

3 c. What is the opportunity cost of producing an additional widget? 5/2 gadget d. Suppose that Jonesville has 240 hours of labor available instead of 120 hours of labor. Does this affect the opportunity costs? Explain. No, this will shift out the PPC from the origin, but the slope (opp. cost) will stay the same. 11. The following table provides six possible production combinations that Smithtown can produce from its available resources and technology during this year. Assume that Smithtown produces only bicycles and tents from its available resources. Combination Bicycles Tents A B C D E F 0 45 a. Sketch Smithtown s PPC. (Measure bicycles on the x axis for this example.) b. Suppose Smithtown is currently producing as combination C. If Smithtown chooses to produce at combination B, what is the opportunity cost of moving from combination C to B? 15 tents c. Suppose Smithtown is currently producing at combination C. If Smithtown choses to produce at combination D, what is the opportunity cost of moving from combination C to D? 30 bicycles d. Is Smithtown s PPC linear? Explain. No, convex. Smithtown s resources are not equally well suited to producing bikes and tents. Say Smithtown devotes all resources to bikes, not all of those resources are particularly useful to bikes. Smithtown can move some resources away from bikes to tents without significantly decreasing bike production. However, the more tents Smithtown chooses to produce, the more resources better suited for bikes will be used less productively. This specialization of resources results in a PPC that is bowed out from the origin. 12. There are two islands in the middle of the ocean, and these two islands produce fish and baskets. Big Island can produce either 100 fish per day and 0 baskets per day or 0 fish per day and 200 baskets per day. Big Island can also produce any combination of goods that lies on its linear PPC. Small Island can produce either 80 fish per day and 0 baskets per day or 0 fish per day and 80 baskets per day. Like Big Island, Small Island has a linear PPC. (Measure fish on the y axis.) a. Sketch the PPCs for Big Island and Small Island. b. What is the slope of Big Island s PPC? 1/2 Of Small Island s PPC? 1

4 c. What is the opportunity cost of producing an additional basket on Big Island? ½ fish On Small Island? 1 fish Which island can produce baskets at a lower opportunity cost? Big Island d. What is the opportunity cost of producing an additional fish on Big Island? 2 baskets On Small Island? 1 fish Which island can produce fish at a lower opportunity cost? Small Island e. What good should Big Island specialize in producing? Baskets What good should Small Island specialize in producing? Fish Positive and Normative Economics 13. Decide whether each of the statements is a normative statement or a positive statement. a. The gasoline tax is projected to yield \$10 million in tax revenue next year. Positive b. If the gasoline tax were raised by 10 cents per gallon, tax revenue would increase by 4%. Positive c. The state should raise the gasoline tax for the coming year. An increase will reduce congestion and smog, which is more important than the cost to commuters. Normative d. Mandatory school enhances the work skills of students. Normative e. The age of mandatory school attendance should be extended. Normative f. An extension of mandatory school attendance will increase government education costs by \$2 million for the state. Positive 14. Define positive economics and normative economics. Why does normative economics cause greater disagreement among economists? Positive: descriptive; objective; how world works. Negative: prescriptive; subjective; how world should work Economists may not share the same values and will reach different conclusions about how the world should work. Supply and Demand 15. Graph supply and demand curves, indicating equilibrium price and quantity on the axes. Draw a correctly labeled graph showing the effect on equilibrium price and quantity in the market for oranges when, ceteris paribus, each of the following changes occurs. a. There is a freeze in Florida that kills many of the orange groves. Top left b. The wages of orange workers decrease. Top right c. Research finds oranges have additional health benefits. Bottom left d. The price of tangerines decreases. Bottom right 16. The following chart shows the quantity demanded in the competitive market for bicycles.

5 Price per bicycle Quantity of bicycles demanded per week \$ ,000 a. Suppose the price is initially \$40. If price rises by \$20, what happens to the quantity demanded? Decreases by 300 b. Suppose the price is initially \$40. If price falls by \$40, what happens to quantity demanded? Doubles (increases by 500) 17. For each of the following scenarios (in the table below), fill in the missing information. Does that scenario cause a shift of or movement along the demand curve? If a shift occurs, does the demand curve shift to the right or left? Scenario Specified market Movement (M) or shift (S) Demand shift right (->) or left (<-) People s income increases Market for exotic vacations S People s incomes decreases. Market for goods sold in secondhand S shops Price of bicycles increases. Market for bicycles M Price of tennis balls increases. Market for tennis racquets S Price of movie tickets decreases. Popcorn at movie theater S Popularity of music playing device Market for music-playing devices S increases. Popularity of name-brand clothing Market for band-name designer S items decreases. clothing Winter clothing is expected to go on Market for winter clothing S sale next month. Number of urban residents increases. Market for apartments in urban areas S 18. The following graph represents the supply curve for the production of widgets in Town Center. a. At a price of \$20, how many widgets are producers willing to supply? 40 widgets b. At a price of \$40, how many widgets are producers willing to supply? 80 widgets c. Suppose there are ten widget producers in Town Center and the price of widgets is \$50. If each producer produces the same number of widgets, how many widgets will each produce? 10 widgets d. Suppose price is initially \$30 but then falls to \$20. What is the change in quantity supplied? 60 to 40 e. Suppose price is initially \$30 but then rises to \$50. What is the change in quantity supplied? 60 to 100 f. What price must suppliers receive in order to be willing to supply 80 widgets? \$40 g. What price must suppliers receive in order to be willing to supply 40 widgets? \$20

6 h. How does the slope of a supply curve reflect the relationship between price and quantity supplied? Upward sloping/positive slope. Quantity supplied increases when price increases and quantity supplied decreases when price decreases 19. For each of the following scenarios (in the table below), fill in the missing information. Does that scenario cause a shift of or movement along the supply curve? If a shift occurs, does the supply curve shift to the right or left? Scenario Specified market Movement (M) or shift (S) Supply shift right (->) or left (<-) Labor costs for air travel and cruise Market for exotic vacations S ships increase. Prices of office equipment and phone Market for call center services S service rise by 40% Price of bicycles increases. Market for bicycles M Price of leather boots increases. Market for beef products S Price of leather boots increases. Market for leather belts S New technology for music players Market for music-playing devices S revealed. Price of brand-name designer clothing Market for brand-name designer M increases. clothing Number of coffee shop owners in the metro area increases. Market for coffee in the metro area S 20. The demand and supply schedules for Healthy Snacks, Inc., is provided in the table below. Price Quantity demanded Quantity supplied \$0 1, a. Sketch the demand and supply curves for Healthy Snacks, Inc. Don t worry about being precise. Focus on drawing the relationships. b. Indicate equilibrium price and quantity. c. Fill in the following table based on the data given. (Hint: If there is excess in supply, there is no excess demand and vice versa.) Price Excess demand Excess supply Shortage or Surplus? \$0 1,000 Shortage Shortage Shortage 30 Equilibrium Equilibrium Surplus Surplus 21. For each of the following scenarios, draw a correctly labeled graph showing the effect on equilibrium price and quantity when, ceteris paribus, each of the following changes occurs. Indicate initial market demand (D 1 ), supply (S 1 ), equilibrium price (P 1 ), and equilibrium quantity (Q 1 ) as well as any changes to the market demand (D 2 ), and/or supply (S 2 ) curves, and indicate the new equilibrium price (P 2 ) and quantity ( Q 2 ). a. The price of gasoline increases by 40 percent. What happens in the market for bicycles? D (Substitute good) b. The price of gasoline increases by 40 percent. What happens in the market for fuel-inefficient SUVs? D (complementary goods) c. New technology for music-playing is developed? What happens in the market for these devices? S d. The price of labor decreases. What happens in the market for fast-food restaurants? S e. Income increases and good X is a normal good. What happens in the market for good X? D f. Income increases and good X is an inferior good. What happens in the market for good X? D

7 Price Floors and Price Ceilings 22. Consider the market for housing in Metropolitan City, where all housing units are exactly the same. Currently, the equilibrium price of housing is \$2,000 a month and local residents consume 1,500 units of housing. The local residents argue that housing is too expensive and an effective price ceiling is implemented. When the price ceiling is implemented by the local government council, only 1,200 units of housing are supplied. Is this an efficient level of housing for Metropolitan City? Explain and use a graph to show equilibrium quantity and price, as well as the price ceiling and the quantity supplied and quantity demanded after the price ceiling is implemented is not an efficient level of housing consumers willing to pay more, but suppliers are restricted on how much they can receive. 23. Use the graph below to answer the following questions. a. What is the equilibrium price? Equilibrium quantity? P1, Q3 b. Suppose a price floor of P 3 is implemented by the government in this market. What will happen to the price and quantity once this price floor is implemented? Not effective price floor. P3 < P1 (equilibrium P&Q will not change) c. Suppose a price floor of P 2 is implemented by the government in this market. What will happen to the price and quantity once this price floor is implemented? Effective. P2 > P1. At P2, Q1 demanded and Q4 supplied; excess supply of Q4--Q1 (surplus) d. You are told that an effective price floor has been implemented in this market and the resultant surplus is greater than Q 4 -Q 1. What do you know about the level of this price floor? Price floor must be set at a price > P2 e. Where must be true for a price floor to be effective? Must be set at a price greater than the equilibrium price f. Suppose a price ceiling of P 2 is implemented by the government in this market. What will happen to the price and quantity once this price ceiling is implemented? Not effective price floor. P2 > P1 (equilibrium P &Q will not change) g. Suppose a price ceiling of P 3 is implemented by the government in this market. What will happen to the price and quantity once this price ceiling is implemented? Effective. P3 < P1. At P3, Q5 is demanded and Q2 is supplied; excess supply of Q5 Q2 (shortage) h. You are told that an effective price ceiling has been implemented in this market and the resultant shortage is less than Q 5 -Q 2. What do you know about the level of this price ceiling? Must be between P1 and P3 i. Where must be true for a price ceiling to be effective? Must be set at a price less than Pe

8 24. The market for taxi rides in Metropolitan City this week is described in the following table. Assume that all taxi rides are the same. Price of taxi rides Quantity of taxi rides demanded per week Quantity of taxi rides supplied per week \$ a. What is the equilibrium price and quantity of taxi rides in Metropolitan City per week? Equilibrium occurs when the quantity demanded equals the quantity supplied. b. Suppose the government institutes a medallion system that limits the number of taxi rides available in Metropolitan City to 80 per week. According to the data in the table, the equilibrium price is \$5 and the equilibrium quantity is 120 taxi rides per week. At what price will consumers want to purchase 80 taxi rides per week? Consumers will demand 80 taxi rides per week at a price of \$7 At what price will suppliers be willing to supply 80 taxi rides per week? Suppliers are willing to supply 80 taxi rides per week for a price of \$3. What price will a taxi medallion rent for in this market? Explain. The medallion will rent for \$4 per taxi ride, or the difference between the demand price and the supply price when the quantity of taxi rides is limited to 80 per week. c. Graph the taxi ride market in Metropolitan City. On this graph, indicate the equilibrium price and quantity, the quota limit, the demand price, the supply price, and the medallion s rental price. d. What is total value of the taxi medallions per week in Metropolitan City? The taxi medallions are worth the product of the medallion rent per ride times the number of taxi rides per week or (\$4 per ride)(80 rides), or \$320.

### Recitation #4 Week 02/02/2009 to 02/08/2009 Chapter 5: The Market Strikes Back

Recitation #4 Week 02/02/2009 to 02/08/2009 Chapter 5: The Market Strikes Back Problems and Exercises 1. A price ceiling is implemented in the market for housing in Metropolitan City, where all housing

### 4 THE MARKET FORCES OF SUPPLY AND DEMAND

4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 3 - Demand and Supply - Sample Questions Answers are at the end fo this file MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A relative

### 3. George W. Bush is the current U.S. President. This is an example of a: A. Normative statement B. Positive statement

Econ 3144 Fall 2006 Test 1 Dr. Rupp Name Sign Pledge I have neither given nor received aid on this exam Multiple Choice Questions (3 points each) 1. What you give up to obtain an item is called your A.

### 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output from OF to OD?

Solutions to Problem set 1 (chp 1 Q1-7 / chp 3 Q3-7) 28 possible points Chapter 1 1. According to Figure 1.1, what is the opportunity cost of increasing consumer output from OF to OD? In figure 1.1, the

### Supply and Demand Fundamental tool of economic analysis Used to discuss unemployment, value of \$, protection of the environment, etc.

Supply and emand Fundamental tool of economic analysis Used to discuss unemployment, value of \$, protection of the environment, etc. Chapter Outline: (a) emand is the consumer side of the market. (b) Supply

### 1. If the price elasticity of demand for a good is.75, the demand for the good can be described as: A) normal. B) elastic. C) inferior. D) inelastic.

Chapter 20: Demand and Supply: Elasticities and Applications Extra Multiple Choice Questions for Review 1. If the price elasticity of demand for a good is.75, the demand for the good can be described as:

### Non Sequitur by Wiley Miller

SUPPLY & DEMAND Non Sequitur by Wiley Miller Graph Basics Movement change along the curve Shift the curve moves Increase to the right Decrease to the left Intersection of curves Price Label: both axis,

### BPE_MIC1 Microeconomics 1 Fall Semester 2011

Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MIC1 Microeconomics 1 Fall Semester 2011 Final Exam - 05.12.2011, 9:00-10:30 a.m. Test A Guidelines and Rules:

### Economics 101 Fall 2011 Homework #3 Due 10/11/11

Economics 101 Fall 2011 Homework #3 Due 10/11/11 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

### KOÇ UNIVERSITY ECON 321 - INTERNATIONAL TRADE

KOÇ UNIVERSITY ECON 321 - INTERNATIONAL TRADE Mid-term Exam (100 points; 90 minutes) Answer all 5 questions. In providing answers to the questions in this section algebra or graphs might be helpful. State

### Practice Exam 1. 1. Economics is the study of choice under conditions of a. demand b. supply c. scarcity d. opportunity e.

Practice Exam 1 1. Economics is the study of choice under conditions of a. demand b. supply c. scarcity d. opportunity e. abundance 2. Suppose your friends take you out for dinner on your birthday and

### Midterm Exam #2. ECON 101, Section 2 summer 2004 Ying Gao. 1. Print your name and student ID number at the top of this cover sheet.

NAME: STUDENT ID: Midterm Exam #2 ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your

### DEMAND AND SUPPLY. Chapter. Markets and Prices. Demand. C) the price of a hot dog minus the price of a hamburger.

Chapter 3 DEMAND AND SUPPLY Markets and Prices Topic: Price and Opportunity Cost 1) A relative price is A) the slope of the demand curve B) the difference between one price and another C) the slope of

### Midterm #1: Practice Midterm

Dr. Barry Haworth University of Louisville Department of Economics Economics 201 Midterm #1: Practice Midterm 1. One topic that is sometimes debated at all levels of government is whether to fund athletic

### Figure 4-1 Price Quantity Quantity Per Pair Demanded Supplied \$ 2 18 3 \$ 4 14 4 \$ 6 10 5 \$ 8 6 6 \$10 2 8

Econ 101 Summer 2005 In-class Assignment 2 & HW3 MULTIPLE CHOICE 1. A government-imposed price ceiling set below the market's equilibrium price for a good will produce an excess supply of the good. a.

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Multiple choice review questions for Midterm 2 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A consumption point inside the budget line A) is

### Answers to the Problems Chapter 3

Answers to the Problems Chapter 3 1. a. ½ pound of wool trades for 1 pound of butter trades. b. Butter is 40 a pound. c. Yes, many people would accept Mr. Gregg s offer. People could use \$1.60 to buy 8

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Hint: draw graphs in the margins to check your answers. And remember that an increase in

### Demand and Supply. Demand and supply determine the quantities and prices of goods and services.

Demand and Supply Chapter CHAPTER CHECKLIST Demand and supply determine the quantities and prices of goods and services. Distinguish between quantity demanded and demand, and explain what determines demand.

### Q D = 100 - (5)(5) = 75 Q S = 50 + (5)(5) = 75.

4. The rent control agency of New York City has found that aggregate demand is Q D = 100-5P. Quantity is measured in tens of thousands of apartments. Price, the average monthly rental rate, is measured

### 6. In general, over longer periods, demand tends to become (A) More elastic (B) Perfectly elastic (C) Perfectly inelastic (D) Less elastic

5. The demand for a good is said to be inelastic if (A) More units will be purchased if price increases (B) The percentage change in quantity demanded is greater than the percentage in price (C) The demand

### 11 PERFECT COMPETITION. Chapter. Competition

Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

### LAW OF MARKET EQUILIBRIUM A free market, if out of equilibrium, tends toward equilibrium.

LAW OF MARKET EQUILIBRIUM A free market, if out of equilibrium, tends toward equilibrium. Free market = one in which prices and quantities are set by bargaining between fully informed buyers and sellers

### Knowledge Enrichment Seminar for Senior Secondary Economics Curriculum. Macroeconomics Series (3): Extension of trade theory

Knowledge Enrichment Seminar for Senior Secondary Economics Curriculum Macroeconomics Series (3): Extension of trade theory by Dr. Charles Kwong School of Arts and Social Sciences The Open University of

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 6 - Markets in Action - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The short-run impact of the San Francisco earthquake

Advanced International Economics Prof. Yamin Ahmad ECON 758 Sample Midterm Exam Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark the

### CHAPTER 3: DEMAND, SUPPLY, AND MARKET EQUILIBRIUM

CHAPTER 3: DEMAND, SUPPLY, AND MARKET EQUILIBRIUM Introduction Supply and demand are mechanisms by which our market economy functions. Changes in supply and demand affect prices and quantities produced,

### Law of Demand: Other things equal, price and the quantity demanded are inversely related.

SUPPLY AND DEMAND Law of Demand: Other things equal, price and the quantity demanded are inversely related. Every term is important -- 1. Other things equal means that other factors that affect demand

### Chapter 4 Supply and Demand Macroeconomics In Context (Goodwin, et al.)

Chapter 4 Supply and Demand Macroeconomics In Context (Goodwin, et al.) Chapter Overview In this chapter, you ll find the basics of supply and demand analysis. As you work through this chapter, you will

### Midterm Exam #1 - Answers

Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.

### Problems: Table 1: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2

Problems: Table 1: Labor Hours needed to make one Amount produced in 90 hours: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2 1. Refer to Table 1. For Carolyn, the opportunity cost of 1

### PAGE 1. Econ 2113 - Test 2 Fall 2003 Dr. Rupp. Multiple Choice. 1. The price elasticity of demand measures

PAGE 1 Econ 2113 - Test 2 Fall 2003 Dr. Rupp Multiple Choice 1. The price elasticity of demand measures a. how responsive buyers are to a change in income. b. how responsive sellers are to a change in

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The law of demand states that, other things remaining the same, the lower the price of a good,

### Supplement Unit 1. Demand, Supply, and Adjustments to Dynamic Change

1 Supplement Unit 1. Demand, Supply, and Adjustments to Dynamic Change Introduction This supplemental highlights how markets work and their impact on the allocation of resources. This feature will investigate

### Final Exam (Version 1) Answers

Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

### Demand, Supply, and Market Equilibrium

3 Demand, Supply, and Market Equilibrium The price of vanilla is bouncing. A kilogram (2.2 pounds) of vanilla beans sold for \$50 in 2000, but by 2003 the price had risen to \$500 per kilogram. The price

### In following this handout, sketch appropriate graphs in the space provided.

Dr. McGahagan Graphs and microeconomics You will see a remarkable number of graphs on the blackboard and in the text in this course. You will see a fair number on examinations as well, and many exam questions,

### Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam.

, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers

### MICROECONOMIC PRINCIPLES SPRING 2001 MIDTERM ONE -- Answers. February 16, 2001. Table One Labor Hours Needed to Make 1 Pounds Produced in 20 Hours

MICROECONOMIC PRINCIPLES SPRING 1 MIDTERM ONE -- Answers February 1, 1 Multiple Choice. ( points each) Circle the correct response and write one or two sentences to explain your choice. Use graphs as appropriate.

### Economics 101 Midterm Exam #1. February 26, 2009. Instructions

Economics 101 Spring 2009 Professor Wallace Economics 101 Midterm Exam #1 February 26, 2009 Instructions Do not open the exam until you are instructed to begin. You will need a #2 lead pencil. If you do

### University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 3 Demand and Supply

University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 3 Demand and Supply 1) The relative price of a good is all of the following

### Economics 103h Fall l 2012: Review Questions for Midterm 2

Economics 103h Fall l 2012: Review Questions for Midterm 2 Essay/Graphing questions 1, Explain the shape of the budget line. 2. What shifts the budget line and why? Give an example in words and demonstrate

### SUPPLY AND DEMAND : HOW MARKETS WORK

SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern

### Demand. See the Practical #4A Help Sheet for instructions and examples on graphing a demand schedule.

Demand Definition of Demand: Demand is a relation that shows the quantities that buyers are willing and able to purchase at alternative prices during a given time period, all other things remaining the

### Total Hours Revenue Open (dollars) 1 \$35 2 60 3 80 4 92 5 100 6 105

ECON 202-505, FALL 2011 Principles of Microeconomics Homework 1 Instructor: Sung Ick Cho 1) In economics, choices must be made because we live in a world of A) unemployment. B) scarcity. C) greed. D) unlimited

### Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space on the last page.

Econ 101, Section 1, F09, Schroeter Final Exam, Red Choose the single best answer for each question. Do all of your scratch work in the margins or in the blank space on the last page. 1. Pete receives

Chapter 8 Comparative Advantage and the Gains from International Trade Prepared by: Fernando & Yvonn Quijano 2008 Prentice Hall Business Publishing Economics R. Glenn Hubbard, Anthony Patrick O Brien,

### Marginal cost. Average cost. Marginal revenue 10 20 40

Economics 101 Fall 2011 Homework #6 Due: 12/13/2010 in lecture Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework

### Midterm I. 1 Multiple-choice Questions (30 points) Economics 110 Spring 2005 Tanya Rosenblat. Name: Section:

Economics 110 Spring 2005 Tanya Rosenblat Name: Section: Before you proceed, write down your name and section number above. Please read all questions carefully. You will get full credit only if you provide

### International Trade Policy ECON 4633 Prof. Javier Reyes. Test #1

International Trade Policy ECON 4633 Prof. Javier Reyes Test #1 Instructions Out of the following 10 questions you must answer only 8. You are free to choose questions from different sections. Section

### The level of price and inflation Real GDP: the values of goods and services measured using a constant set of prices

Chapter 2: Key Macroeconomics Variables ECON2 (Spring 20) 2 & 4.3.20 (Tutorial ) National income accounting Gross domestic product (GDP): The market value of all final goods and services produced within

### Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay. Lecture - 13 Consumer Behaviour (Contd )

(Refer Slide Time: 00:28) Managerial Economics Prof. Trupti Mishra S.J.M. School of Management Indian Institute of Technology, Bombay Lecture - 13 Consumer Behaviour (Contd ) We will continue our discussion

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Survey of Microeconomics, Quiz #1 Fall 2006 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A relative price is A) the number of dollars that

### Lab 17: Consumer and Producer Surplus

Lab 17: Consumer and Producer Surplus Who benefits from rent controls? Who loses with price controls? How do taxes and subsidies affect the economy? Some of these questions can be analyzed using the concepts

### a. Meaning: The amount (as a percentage of total) that quantity demanded changes as price changes. b. Factors that make demand more price elastic

Things to know about elasticity. 1. Price elasticity of demand a. Meaning: The amount (as a percentage of total) that quantity demanded changes as price changes. b. Factors that make demand more price

### Chapter 13 International Trade: Does it Jeopardize American Jobs

Chapter 13 International Trade: Does it Jeopardize American Jobs Multiple Choice Questions 1. In 2006, trade made up percent of the U.S. economy. a. 1.3 b. 5.0 C. 11.5 d. 22.7 2. In 2005, the U.S. experienced

### chapter: Solution Solution The Rational Consumer

S11-S156_Krugman2e_PS_Ch1.qxp 9/16/8 9:21 PM Page S-11 The Rational Consumer chapter: 1 1. For each of the following situations, decide whether Al has increasing, constant, or diminishing marginal utility.

### Practice Questions Week 6 Day 1

Practice Questions Week 6 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Economists assume that the goal of the firm is to a. maximize total revenue

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Econ 201 Practice Test 1 Professor V. Tremblay MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Scarcity can best be defined as a situation in which:

### Week 1: Functions and Equations

Week 1: Functions and Equations Goals: Review functions Introduce modeling using linear and quadratic functions Solving equations and systems Suggested Textbook Readings: Chapter 2: 2.1-2.2, and Chapter

### 2Choice Sets and Budget Constraints

S O L U T I O N S 2Choice Sets and Budget Constraints Solutions for Microeconomics: An Intuitive Approach with Calculus (International Ed.) Apart from end-of-chapter exercises provided in the student Study

### ACTIVITY 14.1 STOMPING GROUNDS: BUYERS

LESSON 14 HOW ARE STOCK PRICES DETERMINED? ACTIVITY 14.1 STOMPING GROUNDS: BUYERS Coffee is your favorite drink. For you and everyone in your family, a good day begins with a nice fresh cup. Stomping Grounds,

Appendi F Business and Economic Applications F1 F Business and Economic Applications Understand basic business terms and formulas, determine marginal revenues, costs and profits, find demand functions,

### 3.3 Applications of Linear Functions

3.3 Applications of Linear Functions A function f is a linear function if The graph of a linear function is a line with slope m and y-intercept b. The rate of change of a linear function is the slope m.

### Chapter 3 Market Demand, Supply and Elasticity

Chapter 3 Market Demand, Supply and Elasticity Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. Ceteris paribus means (a) other things

### Econ 201 Exam 1 F2002 Professor Phil Miller Name: Student Number:

Econ 201 Exam 1 F2002 Professor Phil Miller Name: Student Number: Multiple Choice (3 points each) Directions: Identify the letter of the choice that best completes the statement or answers the question.

### Selected Homework Answers from Chapter 3

elected Homework Answers from Chapter 3 NOTE: To save on space, I have not given specific labels to my axis, but rather stuck with just and. Ideally, you should put specific labels. For example, the vertical

### A synonym is a word that has the same or almost the same definition of

Slope-Intercept Form Determining the Rate of Change and y-intercept Learning Goals In this lesson, you will: Graph lines using the slope and y-intercept. Calculate the y-intercept of a line when given

### Consumers face constraints on their choices because they have limited incomes.

Consumer Choice: the Demand Side of the Market Consumers face constraints on their choices because they have limited incomes. Wealthy and poor individuals have limited budgets relative to their desires.

### Section 1.5 Linear Models

Section 1.5 Linear Models Some real-life problems can be modeled using linear equations. Now that we know how to find the slope of a line, the equation of a line, and the point of intersection of two lines,

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

### This file includes the answers to the problems at the end of Chapters 1, 2, 3, and 5 and 6.

This file includes the answers to the problems at the end of Chapters 1, 2, 3, and 5 and 6. Chapter One 1. The economic surplus from washing your dirty car is the benefit you receive from doing so (\$6)

### Economics 301 Problem Set 4 5 October 2007

Economics 301 Name Problem Set 4 5 October 2007 Budget Lines and Indifference Curves and the Consumer Optimum 1. Parvez, a pharmacology student, has allocated \$120 per month to spend on paperback novels

### The Central Idea CHAPTER 1 CHAPTER OVERVIEW CHAPTER REVIEW

CHAPTER 1 The Central Idea CHAPTER OVERVIEW Economic interactions involve scarcity and choice. Time and income are limited, and people choose among alternatives every day. In this chapter, we study the

### Model Building and Gains from Trade

Model Building and Gains from Trade Previously... Economics is the study of how people allocate their limited resources to satisfy their nearly unlimited wants. Scarcity refers to the limited nature of

### How to Study for Class 4: The Determinants of Demand and Supply

1 How to Study for Class 4: The Determinants of Demand and Supply Chapter 4 introduces the factors that will shift the shift plus two new elasticity concepts. 1. Begin by looking over the Objectives listed

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

E203, Principles of Microeconomics Quiz 2 - Demand and Supply Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1)

### A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

### Chapter 4 Individual and Market Demand

Chapter 4 Individual and Market Demand Questions for Review 1. Explain the difference between each of the following terms: a. a price consumption curve and a demand curve The price consumption curve (PCC)

### Economics 100A. Final Exam

Name form number 1 Economics 100A Final Exam Fill in the bubbles on your scantron with your id number (starting from the left side of the box), your name, and the form type. Students who do this successfully

1 The Market for Factors of Production Factors of Production are the inputs used to produce goods and services. The markets for these factors of production are similar to the markets for goods and services

economicsentrance.weebly.com Basic Exercises Micro Economics AKG 09 Table of Contents MICRO ECONOMICS Budget Constraint... 4 Practice problems... 4 Answers... 4 Supply and Demand... 7 Practice Problems...

### Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Chapter 12 - Behind the Supply Curve - Inputs and Costs Fall 2010 Herriges (ISU) Ch. 12 Behind the Supply Curve Fall 2010 1 / 30 Outline 1 The Production Function

### CHAPTER 3 CONSUMER BEHAVIOR

CHAPTER 3 CONSUMER BEHAVIOR EXERCISES 2. Draw the indifference curves for the following individuals preferences for two goods: hamburgers and beer. a. Al likes beer but hates hamburgers. He always prefers

### Practice Questions Week 2 Day 1 Multiple Choice

Practice Questions Week 2 Day 1 Multiple Choice 1. When individuals come together to buy and sell goods and services, they form a(n) a. economy b. market c. production possibilities frontier d. supply

ECO364 - International Trade Chapter 2 - Ricardo Christian Dippel University of Toronto Summer 2009 Christian Dippel (University of Toronto) ECO364 - International Trade Summer 2009 1 / 73 : The Ricardian

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

Chapter 2 The Economic Problem Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The production possibilities frontier A) refers to the

### STUDY GUIDE SUPPLY AND DEMAND

STUDY GUIDE SUPPLY AND DEMAND 1. The Role of Prices: The Forces of Supply and Demand Categorize all forces affecting the prices of individual commodities as operating through either the demand for the

### Econ 202 Section 2 Midterm 1

Douglas, Fall 2009 September 29, 2009 A: Special Code 0000 21 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 2 Midterm 1 1. What will happen

### Pre-Test Chapter 25 ed17

Pre-Test Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor

### Chapter 6 Competitive Markets

Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

### Economic Efficiency, Government Price Setting, and Taxes

CHAPTER 4 Economic Efficiency, Government Price Setting, and Taxes Modified by: Changwoo Nam 1 Economic Efficiency, Government Price Setting, and Taxes A legally determined maximum price that sellers may

### Demand. Lecture 3. August 2015. Reading: Perlo Chapter 4 1 / 58

Demand Lecture 3 Reading: Perlo Chapter 4 August 2015 1 / 58 Introduction We saw the demand curve in chapter 2. We learned about consumer decision making in chapter 3. Now we bridge the gap between the

### N. Gregory Mankiw Principles of Economics. Chapter 13. THE COSTS OF PRODUCTION

N. Gregory Mankiw Principles of Economics Chapter 13. THE COSTS OF PRODUCTION Solutions to Problems and Applications 1. a. opportunity cost; b. average total cost; c. fixed cost; d. variable cost; e. total

### 13. If Y = AK 0.5 L 0.5 and A, K, and L are all 100, the marginal product of capital is: A) 50. B) 100. C) 200. D) 1,000.

Name: Date: 1. In the long run, the level of national income in an economy is determined by its: A) factors of production and production function. B) real and nominal interest rate. C) government budget

### 14.01 Fall 2010 Problem Set 1 Solutions

14.01 Fall 2010 Problem Set 1 Solutions 1. (25 points) For each of the following scenarios, use a supply and demand diagram to illustrate the effect of the given shock on the equilibrium price and quantity

### EC2105, Professor Laury EXAM 2, FORM A (3/13/02)

EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each