MicroeconomicsHomework one answers
MicroeconomicsHomework one answers MICROECONOMICS 1014
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This 6 page Study Guide was uploaded by Madison Holland on Tuesday September 6, 2016. The Study Guide belongs to MICROECONOMICS 1014 at University of Missouri - Columbia taught by in Fall 2016. Since its upload, it has received 25 views.
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Date Created: 09/06/16
ECON 1014 HOMEWORK #1 Chapter 1 1. Lucas is an unemployed mechanic. He collects $250 per week in unemployment insurance, but he must actively “search” for work in order to receive the unemployment insurance. Lucas spends 4 hours per day, 5 days per week, looking for a job. One day, his Aunt Anita, who owns a retail store, offers Lucas a job as window cleaner. She offers to pay Lucas $250 per week after taxes for 40 hours of work. What is Lucas’ opportunity cost to take the window cleaning position? Choose the best answer. (1 pt.; CIRCLE ONE) A. 40 hours per week of lost free time B. There is no opportunity cost to this decision because Lucas receives the same amount of money each week in both scenarios. C. 20 hours per week of lost free time D. $250 in foregone earnings each week E. Impossible to determine from given information. Chapter 21 2. Identify whether the following statements are positive or normative. For “positive” put P in the blank. For “normative” put N in the blank. (½ pt. each; 2 pts. total) i. __N__ Public university student tuition should be funded using a new, higher income tax. ii. __N__ The present level of income tax is unfair. iii. __P__ High mortgage interest rates encourage saving. iv. __P__ A national minimum wage is likely to cause a decrease in the demand for low-skilled labor. Score: _____/21 Chapter 2 Table: Production Possibilities for the United States and Mexico Corn (millions of tons) Potatoes (millions of tons) United States 40 20 Mexico 30 5 3. According to the table, the United States’ opportunity cost of producing each ton of potatoes is __2__ ton(s) of corn, and Mexico’s opportunity cost of producing each ton of potatoes is __6__ ton(s) of corn. (½ pt. each; 1 pt. total) 4. Refer to the table above. Which of the following represents an acceptable trade price if each country specializes in production of the good for which they have a comparative advantage? Choose the best answer. (1 pt.; CIRCLE ONE) A. 2 tons of potatoes for 1 ton of corn < TRADE PRICE < 6 tons of potatoes for 1 ton of corn B. 2 tons of potatoes for 1 ton of corn < TRADE PRICE < 5 tons of potatoes for 1 ton of corn C. 3 tons of corn for 1 ton of potatoes < TRADE PRICE < 4 tons of corn for 1 ton of potatoes D. 2 tons of corn for 1 ton of potatoes < TRADE PRICE < 6 tons of corn for 1 ton of potatoes Table: Production Possibilities for Italy and Belgium Labor Hours Needed to Make 1 pound of: Pasta Linen Italy 10 6 Belgium 8 4 5. According to the table, Italy has a comparative advantage in: (1 pt.; CIRCLE ONE) A. Pasta B. Linen C. Both pasta and linen D. Neither pasta nor linen, because it takes more labor hours for each good. . Chapter 3 1Figure: Strawberry Market S2 S 1 S1à 2 P2 Supply curve shifts left (1 pt.) P1 P1< 2 (1 pt.) Q1> Q2(1 pt.) D Q 2 Q1 According to the figure, the: 6. On the figure above, show what happens in the market for strawberries when there is a A) costs of producing output have decreased.erry crop. Then use inequalities to show how B) technology for producing output has improved.rries has changed. Be sure to note which curve(s) shift and how. (3 pts.) C) costs of producing output have increased. D) price of the product has decreased. Answer Key - Untitled Exam-2 1. C Chapter 4 Table: Equilibrium Adjustment Price Quantity Demanded Quantity Supplied $100 10 13 80 12 12 60 15 11 40 19 10 20 23 9 7. According to the table above, if the market price were $60 would there be a surplus or a shortage? _______shortage______________ (½ pt.) And by how many units? ______4 units_________________ (½ pt.) 8. According to the table above, what would be the equilibrium market price and quantity in this market? P = _____$80_________(½ pt.) Q = _____12 units_____(½ pt.) Figure: Price and Quantity CS 1 pt. CS DWL 1 pt. PS 1 pt. DWL PS 9. i. On the graph above, label the consumer surplus, producer surplus, and DWL at a quantity of 40 units. Assume that the good is purchased at the price given by the demand curve for the given quantity. (3 pts.) ii. Numerically calculate the values of consumer surplus and producer surplus that you labeled in part (i). (1 pt.) CS = ½ (40)(100 – 60) = ½ (40)(40) = 800 (½ pt.) PS = ½ (40)(40) + (60 – 40)(40) = 800 + 800 = 1,600 (½ pt.) Chapter 5 10. If the price of a good increases from $20 to $25 and the quantity demanded of a good decreases from 100 to 90, what is the elasticity of demand? Is the demand elastic, unit elastic, or inelastic? Use the midpoint method. Round to the nearest hundredth. (1 pt.) ∆▯ %∆▯ ▯▯▯▯▯ ▯▯ ▯ ▯.▯(▯ ▯▯ ) ▯▯▯▯▯▯ ▯.▯(▯▯▯▯▯▯) ▯▯▯ ????▯= = ▯ ▯ = = ▯▯ = −0.47 (½ pt.) %∆▯ ∆▯ ▯▯▯▯ ▯▯▯▯▯ ▯.▯(▯ ▯▯ ) ▯▯▯▯▯ ▯.▯(▯▯▯▯▯) ▯ ▯▯.▯ ▯ ▯ ==> Demand is inelastic. (½ pt.) 11. In the market for beer, the elasticity of demand is – 0.8 and the elasticity of supply is + 2.4. Suppose the supply of beer increases by 4%. What is the effect on price? (1 pt.; CIRCLE ONE) A. + 1.67% B. – 1.25% C. + 1.25% D. – 5% 12. If the elasticity of demand is -1.5 and the percent change in price is -10%, what is the percent change in quantity demanded? (1 pt.) ???? = %∆▯ ==> −1.5 = %∆▯ ==> %∆???? = +15% ▯ %∆▯ ▯▯▯% Figure: Gun Market 13. Refer to the figure to answer the following questions. i. In the gun market shown, the buyback purchases ____2,060_____ guns. (1 pt.) ii. What happens to the price of guns when the gun buyback policy goes into effect? (1 pt.; CHOOSE ONE) A. It increases B. It decreases C. It remains the same D. Not enough information iii. What happens to the amount of guns traded on the street when the gun buyback policy goes into effect? (1 pt.; CHOOSE ONE) A. It increases B. It decreases C. It remains the same D. Not enough information
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