Principles of Microeconomics
Principles of Microeconomics ECON 2010
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This 4 page Class Notes was uploaded by Bridie Batz on Friday October 30, 2015. The Class Notes belongs to ECON 2010 at University of Colorado at Boulder taught by William Mertens in Fall. Since its upload, it has received 38 views. For similar materials see /class/232138/econ-2010-university-of-colorado-at-boulder in Economcs at University of Colorado at Boulder.
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Date Created: 10/30/15
Economics 2010 Section I Questions for Review 1 What would the PPF look like if there were decreasing opportunity costs 2 Distinguish between comparative advantage and absolute advantage What gives a person firm or country a comparative advantage Use the table below to answer questions 46 Output per unit of labor Canada Beer 20 80 Milk 40 120 4 In which good does Canada have a absolute advantage if any 5 In which good does Canada have a comparative advantage 6 What is Canada s opportunity cost of beer 7 Define demand thoroughly 8 List all of the influences on consumption choices that change demand 9 Define supply thoroughly 10 a Table 1 is the demand schedule for Bob and Sue It tells us how many CD39s Bob and Sue will purchase each month at different possible prices In the table figure out the market demand curve Graph it labeling all the axes Table 1 Sample Demand Schedule for Bob and Sue P leBohl lesuel QDlMarketl 5 4 6 1 0 3 5 1 5 2 4 20 1 3 b Table 2 is the supply schedule for ACME and AJAX two companies that produce CDs It tells us how many CD39s they will produce each month at different possible prices In the table figure out the market Supply curve Graph it labeling all the axes Table 2 Sample Supply Schedule for ACME and AJAX P QslACMEl QslAJAXl QSlMarketl 5 2 10 1 15 4 2 20 5 3 c Given the data in parts a and b graph and label the market equilibrium 11 Define and explain the concept of consumer surplus and how it can always be found 12 If supply increases will consumer surplus rise or fall Explain 13 Consider the following example of the Ricardian model which focuses on trade from tech differences Units of output per unit of labor Uzbekistan U Turkmenistan T Mutton M 6 10 Natural gas G 2 10 Labor Force 5000 1000 Draw the PPFs on one graph put G on the horizontal axis and label the endpoints Which country has an absolute advantage in mutton Which country has it in gas Determine and state each country s opportunity cost of gas If trade occurs which country will export mutton 9 57 H gt Consider the following data for tshirts Calculate the price elasticity of demand between P1 2 and P2 3 and between P1 4 and P2 5 42142 30 75 25 10 20 125 l5 15 10 175 mwaHW Lquot Given the following supply and demand equations 2Q P 5 04QS Graph the above equations and find the equilibrium P and Q Find the point that is in the middle of the demand curve Are the present equilibrium levels such that total revenue is maximized Should the price be higher or lower in order to increase revenue What is the maximum possible revenue 9 57 Long problem from last year s exam Problems SHOW WORK 1 The market supply and demand for ski boots are given by the following equations P800 05Qd Pl40l0QS a What is equilibrium quantity b What is equilibrium price c Graph the supply and demand curves below and show equilibrium d Calculate consumer surplus e Calculate producer surplus f Is this market outcome efficient Explain your answer Economics 2010 Section II Questions for Review Define efficiency 19 Define and explain the concept of a positive consumption externality Give an example not involving education 7 be sure to note the difference between the good or service and the externality 3 When a negative production externality exists the market outcome will yield too much production and the price will be too low Both a price floor and a tax could raise the price to the efficient level Explain and show graphically why you would choose the tax over the price floor 4 Define a public good Give an example of a public and a private good and use your definition to make clear the difference between the two 5 In economics there is a concept called Pareto Optimality If a situation is Pareto Optimal then roughly no one person can be made better off without making someone else worse off What is the relationship between the concept of efficiency in our partial equilibrium supply and demand model and the notion of Pareto Optimality 6 Suppose there exists a situation where the supply of rental housing is perfectly inelastic in the shortrun For some reason the city council decides that the price of rental housing is just too high The council has two options rent controls or a subsidy to renters a Will either of these cause inefficiency in the shortrun b Explain which option is probably the better choice think about any changes in incentives that the rent controls or subsidy might bring c Explain which option is preferable in the longrun as supply becomes more elastic 7 What must be true anywhere along one indifference curve What one rule always applies to le What three generalizations about le apply to purchasers and what do they mean 8 List all of the problems that rent controls cause 9 List the problems that a price floor on agricultural products would cause Problems from last year s exam Problems SHOW WORK 1 Linda s consumption of good X and Y give her the following amounts of utility Quantity of X Total utility Quantity of Y Total utility 0 0 0 0 l 20 l 30 2 35 2 42 3 47 3 52 4 55 4 60 5 60 5 66 6 63 6 70 a What is Linda s marginal utility of the 3quoti unit of X What is her lTU of the 3quoti unit of Y b The price of good X is 4and the price of good Y is 2 For any given budget what are the possible bundles that maximize utili c If Linda has 22 to spend on X and Y how much of each good should she buy to maximize her utility N 37 ST 0 P The supply and demand equations for basic graphing calculators are given below P100 4Qd P106QS What is equilibrium quantity What is equilibrium price Graph the supply and demand curves below and show equilibrium Now suppose that the government decides to tax producers 10 per calculator that they sell Calculate the new equilibrium prices and the quantity sold and draw the new with tax equilibrium outcome on the above graph How much of the tax do the consumers pay How much do the producers pay Just give 39 per unit of the tax not total What are total government revenues from the tax