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Extra practice problems

by: Sarah Gordon

Extra practice problems Econ 201

Marketplace > Indiana University > Economics > Econ 201 > Extra practice problems
Sarah Gordon
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practice problems
Intro to Microeconomics
Hewei Shen
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This 7 page Bundle was uploaded by Sarah Gordon on Friday September 23, 2016. The Bundle belongs to Econ 201 at Indiana University taught by Hewei Shen in Fall 2016. Since its upload, it has received 5 views. For similar materials see Intro to Microeconomics in Economics at Indiana University.


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Date Created: 09/23/16
Economics E201­Fall 2016, Non­Graded Assignment 2  For those participating in CL bring your work with you to the session and be sure to put in a good faith attempt in solving the problems prior to your session.   For those not participating in CL you should also work through these problems to gain a better  understanding of the course topics. Complete the following problems from the text book. Chapter Two  Chapter two, Review Quiz—page 43, Review quiz questions 1, 2, 3, 4, and 5  Chapter two, Review Quiz—page 45, questions 1, 2, and 3  Chapter two, problems—pages 50­52, questions 8, 9, 10, 11, 12, 13, 14, 20, 21, and 24 (be sure to do this  one)  Read through the worked out problem on page 49  Read through pages 53­54 for important background information  th  Chapter Three (  some of these topics will be covered in Tuesday’s, September 13     le ) re  Chapter three, review quiz—page 56, questions 1, 2, 3  Chapter three, review quiz—page 61, questions 3, 4, and 5  Chapter three, review quiz—page 65, questions 3, 4, and 5  Chapter three, review quiz—page 67, question 1, 2, 3, and 4  Chapter three, review quiz—page 73, questions 1, 2, and 3  Chapter three, problems—Pages 80 through 82, questions 1, 2, 4, 6, 8, 10, 11, 18, 19, 20, 21, 22, 26, and 27  Read through the worked out problem on page 79 Read through the mathematical note on pages 76 and 77. Answer the below questions:  1. If Canada fully employs its resources and uses the best technology available, it can produce 1000 units of  paper or 100 cars per day.  When the United States fully employs its resources and uses the best technology  available, it can produce 20,000 units of paper or 15,000 cars per day.   A. Which country has a comparative advantage in paper production? Production Possibility Per unit opportunity cost Paper Cars Paper Cars Canada Canada United States United States B. Which country has a comparative advantage in car production? Economics E201­Fall 2016, Non­Graded Assignment 2 2 Economics E201­Fall 2016, Non­Graded Assignment 2 C. Suppose the country that has a comparative advantage in paper production offers to sell the other country  500 units of paper at a price of ½ cars per unit of paper and the other country accepts.  How much of each  good would each country be able to consume after the trade assuming full specialization in the good each  country has a comparative advantage in? Consumption Possibility Paper Cars Canada United States D. Are the countries better off in terms of consumption abilities?  Illustrate with a graph.          Canada                                                                  United States 2. You observe that there is a decrease in the price of tea that was caused by a supply shift in the tea market.   However, you are interested in the coffee market and you know that consumers treat coffee and tea as  substitutes in consumption.  Immediately after the change in the price of tea, given the model of supply and  demand, you can predict that there will be an _______________________________________ A.  excess demand (shortage), which will cause the price to rise in the coffee market.  B.  excess supply (surplus), which will cause the price to rise in the coffee market.  C.  excess demand (shortage), which will cause the price to decrease in the coffee market.  D. excess supply (surplus), which will cause the price to decrease in the coffee market.  E.  excess supply (surplus), which will not change the price in the coffee market. 3.  Due to a drought, consumers in the fishing boat market expect that the price of boats will decrease this  spring, and simultaneously boat production technology improves.  Based on this information you could  safely conclude that the equilibrium quantity of boats traded would ____________________ A. increase. B. decrease.  C. not change. D. increase or decrease or not change. E. first decrease then increase.   3 Economics E201­Fall 2016, Non­Graded Assignment 2 4 Economics E201­Fall 2016, Non­Graded Assignment 2 4.  If there is an increase in the wages paid to workers employed in the production of chocolate due to an  increase in competition for these workers from other industries, what would be expected to happen to the  equilibrium market price and quantity for chocolate? Assume that these workers do not purchase chocolate  for their own consumption. A.   The equilibrium price would increase and the equilibrium quantity would increase.  B.   The equilibrium price would decrease and the equilibrium quantity would decrease. C.   The equilibrium price would increase and the equilibrium quantity would decrease. D.   The equilibrium price would decrease and the equilibrium quantity would be ambiguous. E.   The equilibrium price would be ambiguous and the equilibrium quantity would decrease. 5.  Suppose that a new potato commercial is successful in making people desire potatoes more than they did  previously.  What would most likely happen to the equilibrium price and quantity of potatoes? A.   The equilibrium price would increase and the equilibrium quantity would increase.  B.   The equilibrium price would decrease and the equilibrium quantity would decrease. C.   The equilibrium price would increase and the equilibrium quantity would decrease. D.   The equilibrium price would decrease and the equilibrium quantity would be ambiguous. E.   The equilibrium price would be ambiguous and the equilibrium quantity would decrease. 6.  After an increase in labor costs in the coffee industry we observed a shortage (excess demand) in the coffee  market.  This shortage would ______________________________. A. lead to a decrease supply of coffee. B. lead to a movement up the demand curve for coffee. C. lead to an increase demand for coffee. D. lead to a reduction in the prices of inputs used in coffee production. E. lead to a movement down the demand for coffee. 7.  Suppose that both the equilibrium price of movie theater tickets and the number of people who go to movies  increase.  Which of the following is the best explanation for these observations? A. The income of buyers has increased and movies in theaters are inferior goods.  B. Supply of movies has decreased with no change in demand for movies.  C. Both Supply and Demand of movies has decreased.  D. The income of buyers has decreased and movies in theaters are inferior goods.  E. The price of popcorn has increased. 5 Economics E201­Fall 2016, Weekly Assignment 3  For those participating in CL bring your work with you to the session and be sure to put in a good faith attempt in solving the problems prior to your session.   For those not participating in CL you should also work through these problems to  gain a better understanding of the course topics. Part One Download the sample questions for exam one from the weekly assignment table (where this  assignment is located) and work through the solutions.  Review your class notes, past weekly home assignments, topic list sent via message and all our  in­class problems.  Part Two From text book  Chapter four, Review Quiz—page 90, questions 1, 2, 3, 4, and 5  Chapter four, problems—page 102­103, questions 2, 3, 4, 10, 11. 12, 13, 14, and 15  Read through worked problem on page 101 questions 1, 2, and 3.  Answer the following questions, 1. What are the characteristics of the product that has an inelastic demand? 2. Draw a graph of a downward sloping straight­line demand curve for the hat market and describe  the three different elasticity regions of that curve.  If you were a producer of hats and were  interested in increasing your revenue to its maximum point what would be the potential greatest  amount of revenue the market would provide.  When answering this question do not bring in  supply side consideration or consideration of profit maximization.  You should only use the  information provided by your demand curve and the elasticity of that curve over different price  ranges.  3. Tara buys four music cassettes when the price is $10 and two cassettes when the price is $14. Her price elasticity of demand is (using the average values method or midpoint formula): 4. Avital and Joshua each have their own business selling lemonade in front of their houses. When  they each charge 25 cents per glass, their total revenues are equal. However, when they each  charge 40 cents per glass, Avital's revenues are bigger than Joshua's revenues. This is because: 5. Pick a good that you buy on a regular basis and think about your purchases of it for one month.   Make a list of prices and the quantities you think you would purchase at those prices.  For  example, if the good is milk and you normally purchase 10 quarts a month at an expected price of 1 Economics E201­Fall 2016, Weekly Assignment 3  For those participating in CL bring your work with you to the session and be sure to put in a good faith attempt in solving the problems prior to your session.   For those not participating in CL you should also work through these problems to  gain a better understanding of the course topics. $1, estimate how you would change the quantity you purchase when the price is 25 cents, 50  cents, 75 cents, $1.25, $1.5, $1.75, $2, $3, $4, $5.  Then graph your individual demand curve for  this good.  Describe your price elasticity of demand for the different segments of your individual  demand curve.  What does this mean to you? 2


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