CSU BBA2501micro unit all homework

| June 14, 2018

Unit 1

1) What
determines whether or not a resource is scarce?
Why is the concept of scarcity important to definition of economics?
2) Discuss
the impact of rational self-interest on each of the following decisions:
a)
Whether to attend college full time or enter the
workforce full time
b)
Whether
to buy a new textbook or a used one
c)
Whether
to attend a local college or an out of town college
3)
If behavior is governed by rational
self-interest, why do people make charitable contributions of time and money?
4)
What
good is economic theory if it can’t predict the behavior of a specific
individual?
5)
You can spend spring break either at home
working for $80 per day for five days or go to Florida for the week. If you stay your expenses will total about
$100. If you go to Florida, the airfare,
hotel, food, and miscellaneous expenses will total about $700. What’s your opportunity cost of going to
Florida?
6)
You have the following information concerning
the production of wheat and cloth in the United States and the United Kingdom:

Labor Hours Required to Produce One
Unit

The United Kingdom

The United States

Wheat

2

1

Cloth

6

5

a.
What is the opportunity cost of producing a unit
of wheat in the United Kingdom? In the
United States?
b.
Which country has an absolute advantage in
producing wheat? In producing cloth?
c.
Which country has a comparative advantage in
producing wheat? In producing cloth?
d.
Which country should specialize in producing
wheat? In producing cloth?
7)
Provide some examples of specialized markets or
retail outlets. What makes the web so
conducive to specialization?
8)
Suppose any economy uses two resources (labor
and capital) to produce two goods (wheat and cloth). Capital is relatively more useful in
producing cloth, and labor is relatively more useful in producing wheat. If the supply of capital falls by 10 percent
and the supply of labor increases by 10 percent, how will PPF for wheat and
cloth change?
9)
Determine whether each of the following would
cause the national economy’s PPF to shift inward, outward, or not at all:
a.
An increase in average length of annual
vacations.
b.
An increase in immigration.
c.
A decrease in the average retirement age
d.
The migration of skilled workers to other
countries

Unit 2
1) Using demand and supply curves,
show the effect of each of the following on the market for cigarettes:
a. A cure for lung cancer is found. As the cancer rate drops because of the cure,
the demand for cigarettes will increase shifting the demand curve to the right.
b. The price of
cigars increases. Through substitution,
cigarette prices remaining constant will decrease demand or remain the same in
cigars and increase the demand of cigarettes. In the graph a will represent
cigarettes and be will represent cigars.
c. Wages increase substantially in states that grow
tobacco. A wage increase will raise the
consumer’s propensity to spend and increase demand and likely raise the price
and supply.
d. A fertilizer that increases the
yield per acre of tobacco is discovered.
More crops will increase the supply of cigarettes creating a surplus
reducing demand and lowering the price.
e. There is a sharp increase in the
price of matches, lighters, and lighter fluid.
Because these things complement cigarettes, tobacco demand will
decrease.
f. More states pass laws
restricting smoking in restaurants and public places. Less smoking areas will
cause cigarette demand to decrease.
2) For each of the following pair
of goods, determine whether the goods are substitutes, complements, or
unrelated
a. Peanut butter and jelly
complement each other
b. Public transportation is a
substitute for private transportation or vice versa
c. Coke and Pepsi are substitutes
d. Alarm clocks and automobiles are
unrelated
e. Golf clubs and golf balls
complement each other
3) List five things that are held
constant along a market demand curve, and identify the change in each that
would shift that demand curve to the right—that is, that would increase demand.
4) Why is a firm willing and able
to increase the quantity supplied as the product price increases?
5) “If a price is not an
equilibrium price, there is a tendency for it to move to its equilibrium
level. Regardless of whether the price
is too high or too low to begin with, the adjustment process will increase the quantity
of the good purchased.” Explain, using a
demand and supply diagram.
6) Assume the market for corn is
depicted as in the table that appears below
a. Complete the table below.

Price
Per Bushel

Quantity
Demanded (millions of bushels)

Quantity
Supplied (millions of bushels)

Surplus/Shortage

Will
Price Rise or Fall?

$1.80

320

200

Shortage=120

Rise

$2.00

300

230

Shortage=70

Rise

$2.20

270

270

Equilibrium=0

N/A

$2.40

230

300

Surplus=70

Fall

$2.60

200

330

Surplus=130

Fall

$2.80

180

350

Surplus=170

Fall

b. What market pressure occurs when
quantity demanded exceeds quantity supplied?
Explain.
c. What market pressure occurs when quantity supplied exceeds quantity
demanded? Explain.
d. What is equilibrium price?
e. What could change the equilibrium price?
f. At each price in the first column of the below table (or above on this
paper), how much is sold?
7) Determine whether each of the following statements is true, false, or
uncertain. Then briefly explain each
answer
a. In equilibrium, all sellers can find buyers.
b. In equilibrium, there is no pressure on the market to produce or consume
more than is being sold.
c. At prices above equilibrium, the quantity exchanged exceeds the quantity
demanded.
d. At prices below equilibrium, the quantity exchanged is equal to the
quantity supplied
8)What are
the effects on the equilibrium price and quantity of the steel if the wages of
steelworkers rise and, simultaneously, the price of aluminum rises?

Unit 3 homework
1) Suppose
that 50 units of a good are demanded at a price of $1 per unit. A reduction in price to $0.20 results in an
increase in quantity demanded to 70 units.
Show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in
the price reduce the quantity demanded, assuming price elasticity remains
constant along the demand curve?
2) Fill
in the blanks for each price quantity combination listed in the following
table. Now graph this relationship,
making sure to label each axis. What
relationship have you depicted?

P

Q

Price
Elasticity

Total
Revenue

$9

1

9.1

9

$8

2

5.6

16

$7

3

3.0

21

$6

4

1.9

24

$5

5

1.2

25

$4

6

.82

24

$3

7

.52

21

$2

8

.33

16

3) For
each of the following absolute values of price elasticity of demand, indicate
whether demand is elastic, inelastic, perfectly elastic, perfectly inelastic,
or unit elastic. In addition, determine
what would happen to total revenue if a firm raised its price in each
elasticity range identified.
4) Why
is the price of elasticity of demand for Coca-Cola greater than the price
elasticity of demand for soft drinks generally?
5) Would
the price elasticity of demand for electricity be more elastic over a shorter
or longer period of time?
6) Rank
to following in order of increasing (from negative to positive) cross-price
elasticity of demand with coffee.
Explain you answer.
Bleach___ Tea Cream_____ Cola____
7) Calculate
the income elasticity of demand for each of the following goods:

Quantity
Demanded When Income is $10,000

Quantity
Demand When Income is $20,000

Good
1

10

25

Good
2

4

5

Good
3

3

2

8) Complete each of the following
sentences:
a. The income elasticity of
demand measures, for a given price, the ____________________
in quantity demanded divided by the ______________________
income from which resulted.
b. If a decrease in the
price of one good causes a decrease in demand for another good, the two goods
are ___________________.
c. If the value of the
cross-price elasticity of demand between two goods is approximately zero, they
are considered __________________.

Unit 4 homework
1) Define
market structure. What factors are
considered in determining the market structure of a particular industry?
2) Describe
the characteristics of perfect competition
3) What
type of demand curve does a perfectly competitive firm face? Why?
4) A
perfectly competitive firm has the following fixed and variable costs in the
short run. The market price for the
firm’s product is $150.

Output (A)

FC
(B)

VC (C)

TC=B+C
(D)

TR=150*A
(E)

Profit/Loss=
E – D

MR= Market Price

MC= Change in D/Change in A

Average Revenue=
E/A

0

$100

$0

1

$100

$100

2

$100

$180

3

$100

$300

4

$100

$440

$540

$600

$60

$150

$140

$150

5

$100

$600

6

$100

$780

a.
Complete the table
b. At
what output rate does the firm maximize profit or minimize loss?
c. What
is the firm’s marginal revenue at each positive level of output? Its average revenue? See table.
d.
What can you say about the relationship between marginal
revenue and marginal cost for output rates below the profit-maximizing (or
loss-maximizing) rate? For output rates
above the profit-maximizing (or loss-minimizing) rate?
5) Explain
the different options a firm has for minimizing losses in the short run
6) Suppose
a firm decides to shut down in the short run.
What is the resulting loss?
7)
Use the following data to answer the questions
below.

Q

VC

MC

AVC

1

$10

2

$16

3

$20

4

$25

5

$31

6

$38

7

$46

8

$55

9

$65

a.
Calculate
the marginal cost and average variable cost for each level of production
b.
How
much would the firm produce if it could sell its product for $5? For $7?
For $10?
c.
Explain
your answers
d.
Assuming
that its fixed cost is $3, calculate the firm’s profit at each of the
production levels determined in part (b).
8)
Each
of the following situations could exist for a perfectly competitive firm in the
short run. In each case, indicate
whether the firm should produce in the short run or shut down in the short run,
or whether additional information is needed to determine what it should do in
the short run.
a.
Total
cost exceeds total revenue at all outputs
b.
Variable
cost exceeds total revenue at all outputs.
c.
Total
revenue exceeds fixed cost at all output levels
d.
Marginal
revenue exceeds marginal cost at the current output level.
e.
Price
exceeds average total cost at all output levels
f.
Average
variable cost exceeds price at all output levels
g.
Average
total cost exceeds price at all output levels.

Unit 5 homework
1) Explain
how economies of scale can be a barrier to entry.
2) Identify
the other two barriers to entry and explain how they block new firms from this
market.
3) Suppose
that a certain manufacturer has a monopoly on the sorority and fraternity ring
business (a constant-cost industry) because it has persuaded the “Greeks” to
give it exclusive rights to their insignia.
a.
Using demand and cost curves, draw a diagram
depicting the firm’s profit maximizing price and output level.
b.
Why is marginal revenue less than price for this
firm?
c.
On your diagram, show the deadweight loss that
occurs because the output level is determined by a monopoly rather than by a
competitive market.
d.
What would happen to price and output if the
Greeks decided to charge the manufacturer a royalty fee of $3 per ring?
4) List
three conditions that must be met for a monopolist to price discriminate
successfully
5) Why
is the perfectly discriminating monopolist’s marginal revenue curve identical
to the demand curve it faces?
6) A
monopolistically competitive firm faces the following demand and cost structure
in the short run:

Output

Price
(MR)

FC

VC

TC

TR

Profit/Loss

MC

AVC

0

$100

$100

$0

$100

$0

-$100

1

$90

$100

$50

$150

$90

-$60

$50

$50

2

$80

$100

$90

$190

$160

-$30

$40

$45

3

$70

$100

$150

$250

$210

-$50

$60

$50

4

$60

$100

$230

$330

$240

-$90

$80

$57.50

5

$100

$330

$430

$250

-$180

$100

6

$100

$450

$550

$240

-$310

$120

7

$100

$590

$690

$210

-$480

$140

a. Complete
the table.
b. What
is the highest profit or lowest loss available to this firm?
c. Should
this firm operate or shut down in the short run? Why?
d. What
is the relationship between marginal revenue and marginal cost as the firm
increases output?
7)
Illustrated below are the marginal cost and
average total cost curves for a small firm that is in long-run equilibrium
.png” alt=”Diagram 1″>
a. Locate
the long run equilibrium price and quantity if the firm is perfectly
competitive
b. Label
the price and quantity p1 and q1
c. Draw
in a demand and marginal revenue curve to illustrate long-run equilibrium if
the firm is monopolistically competitive.
Label the price and quantity p2 and q2.
d. How
do the monopolistically competitive firm’s price and output compare to those of
the perfectly competitive firm?
e. How
do long-run profits compare for the two types of firms?
8)
Why
is a firm in monopolistic competition said to be competitive? In what sense is that firm monopolistic?
9)
Why
might a price-leadership model of oligopoly not be an effective means of
collusion in an oligopoly?
10)
Why
would each of the following induce some members of OPEC to cheat on their
cartel agreement?
a.
Newly
joined cartel members are less developed countries
b.
The
number of cartel members doubles from 12 to 24
c.
International
debts of some members grow.
d.
Expectations
grow that some members will cheat
11)
Use
revenue and cost curves to illustrate and explain the sense in which a cartel
behaves like a monopolist.
.png”>.png”>.png”> MC

.png”>

Dollars per unit

.png”>.png”> p
12)
.png”>
c D

MR
0

Quantity per period

.png”> Q

12)
Suppose
there are only two automobile companies, Ford and Chevrolet. Ford believes that Chevrolet will match any
price it sets, but Chevrolet too is interested in maximizing profit. Use the following price and profit data to
answer the following questions.

Ford’s selling price

Chevrolet’s selling price

Ford’s profits (Millions)

Chevrolet’s profits (Millions)

$4000

$4000

$8

$8

$4000

$8000

$12

$6

$4000

$12000

$14

$2

$8000

$4000

$6

$12

$8000

$8000

$10

$10

$8000

$12000

$12

$6

$12000

$4000

$2

$14

$12000

$8000

$6

$12

$12000

$12000

$7

$7

Profit = Millions

Ford

$4,000

Profit $8
&

Profit $12
& $6

Profit $14
& $2

$8,000

Profit $6 &

Profit $10 & $10

Profit $12 & $6

$12,000

Profit $2 &

Profit $6 & $12

Profit $7 & $7

a.
What
price will Ford charge?
b.
What
price will Chevrolet charge once Ford has set its price?
c.
What
is Ford’s profit after Chevrolet’s response?
d.
If
the two firms collaborated to maximize joint profits, what price would they set?
e.
Given
your answer to part (d), how could undetected cheating on price cause the
cheating firm’s profit to rise?
13)
While
grading a final exam, an economics professor discovers that two students have
virtually identical answers. She is
convinced the two cheated but cannot prove it.
The professor speaks with each student separately and offers the
following deal: Sign a statement
admitting to cheating. If both students
sign the statement, each will receive an “F” for the course. If only one signs, he is allowed to withdraw
from the course while the other student is expelled. If neither signs both receive a “C” because
the professor does not have sufficient evidence to prove cheating.

.png”>

.png” alt=”Text box: don’t sign”>

.png”>.png”>.png”>.png”>.png”>.png”>.png”>.png”>
.png” alt=”Text box: withdraw”>.png” alt=”Text box: sign”>.png” alt=”Text box: withdraw”>.png” alt=”Text box: student 1″>.png” alt=”Text box: c”>.png” alt=”Text box: c”>.png” alt=”Text box: expelled”>.png” alt=”Text box: expelled”>.png” alt=”Text box: f”>.png” alt=”Text box: f”> FF
14)

.png” alt=”Text box: don’t sign”>

a.
Draw
a payoff matrix
a. Draw a payoff matrix
b.
Which
outcome do you expect? Why?
15)
Why
is firm behavior under oligopoly so difficult to predict?

Unit 6 homework
How
federal spending priorities have changed since the 1960s.
1) What
spending categories claimed the largest share in 1960s, and most recent
decades?
2) Why
does the budget require a forecast of the economy, under what circumstances
would actual government spending and tax revenue fall to match the budget as
approved?
3) The
difference among an annually balanced budget, a cyclically balanced budget, and
a functional finance. How does each affect the economic fluctuations?
4)
Why has the federal budget been in
deficit in all but 14 years since 1929?
5) What
has happened to the federal debt since 2008 as measured relative to GDP?
6) What
is the level of net public debt (for federal, state, and local governments)
relative to U.S. GDP? How does the U.S. measure compare with that of other
major economies?
7) What
is the difference between gross federal debt and federal debt held by the
public?
8)
Understanding the chapter.
a.
Assume the gross national
debt initially is equal to $3 trillion and the federal government then runs a
deficit of $300 billion.What is the new level of gross debt?
b.
Now suppose the gross
national debt initially is equal to $2.5 trillion and federal government then
runs to deficit of $100 billion

Unit 7 homework
1)
Describe the three types of government
regulation of business. Which two are
discussed at length in this chapter?
2)
Define market power, and then discuss the
rationale for government regulation of firms with market power.
3)
The following graph represents a natural
monopoly
.png” alt=”UnitVIIQ3″>
a.
Why is this firm considered a natural monopoly?
b.
If the firm is unregulated, what price and
output would maximize its profit? What
would be its profit or loss?
c.
If a regulatory commission establishes a price
with the goals of achieving allocative efficiency, what would be the price and
output? What would be the firm’s profit
or loss?
d.
If a regulatory commission establishes a price
with the goal of allowing the firm a normal profit, what would be the price and
output? What would be the firm’s profit
or loss?
e.
Which one of the prices in parts (b), (c), and
(d) maximizes consumer surplus? What
problem, if any, occurs at this price?
4)
Why do producers have more interest in
government regulations than consumers do?
a.
Compare and contrast the public-interest and
special-interest theories of economic regulation. What is the capture theory of regulation?
b.
Which theory of regulation explains why the
massive fraud of Bernie Madoff went undetected for years?
5)
Identify the type of anticompetitive behavior
illustrated by each of the following:
a.
A university requires buyers of season tickets
for its basketball games to buy season tickets for its football games as well
b.
Dairies that bid on contracts to supply milk to
school districts collude to increase what they charge.
c.
The same individual serves on the board of
directors of General Motors and Ford
d.
A large retailer sells merchandise below cost in
certain regions to drive competitors out of business.
e.
A producer of soft drinks sells to a retailer
only if the retailer agrees not to buy from the producer’s major competitor.
6)
Identify the four U.S. merger waves and explain
the driving force behind each.
7) Calculate
the Herfindahl-Hirschman index (HH) for each of the following industries. Which industry is the most concentrated?
a. An
industry with five firms that have the following market shares: 50 percent, 30 percent, 10 percent, 5
percent, and 5 percent.
b. An
industry with five firms that have the following market shares: 60 percent, 20 percent, 10 percent, 5 percent,
and 5 percent.
c. An industry with five firms, each of which has a 20 percent
market share

Industry a

Industry b

Industry c

Firm

Market Share (percent)

Market Share Squared

Market Share (percent)

Market Share Squared

Market Share (percent)

Market Share Squared

1

50

2500

60

3600

20

400

2

30

900

20

400

20

400

3

10

100

10

100

20

400

4

5

25

5

25

20

400

5

5

25

5

25

20

400

HHI

3550

4150

2000

8)
William
Shepherd’s research of U.S. industries showed a clear trend in the
competitiveness of the U.S. economy between 1958 and 2000. Is the economy growing more or less
competitive, and how did Shepherd explain this trend?

Unit 8 homework
1. Complete each of the following sentences:
a. Resources for which periodic use
can be continued indefinitely are known as ________
resources.
b. Resources that are available
only in a fixed amount are ____________
resources.
c. The possibility that a
open-access resource is used until the net marginal value of additional use
equals zero is known as the ___________________________-.
2) Why have authorities found it so
difficult to regulate the fishing catch in the open ocean to allow for a
sustainable yield?
3) Suppose you wish to reduce
negative externality by imposing a tax on the activity that creates that
externality. When the amount of the
externality produced per unit of output increases as output increases, the correct
tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve
slopes upward.
4) Review the situation illustrated
in the graph above. If the government
sets the price of electricity at the socially optimal level, why is the net
gain equal to triangle abc, even though consumers now pay a higher price for
electricity? What would the net gain be
if the government set the price above the optimal level?
5) Use the data in the table below
to answer the following questions
a. What is the marginal external
cost of production?
b. What level is produced if there
is no regulation of the externality?
c. What level should be produced to
achieve economic efficiency?
d. Calculate the dollar value of
the net gain to society from correcting the externality

6) Think of an industry that
pollutes the water and has access to variable technology for reducing
pollution. Graphically illustrate and
explain the impact of each of the following, other things constant, on the optimal
level of water quality:
a. New evidence is discovered about
a greater risk of cancer from water pollution
b. The cost of pollution-control
equipment increases.
c. A technological improvement
reduces the cost of pollution control.
7) The following graph shows the
marker for pollution rights
.png”>.png”>.png”>.png”>

$ per unit

P’ D S
.png”> S’
.png”> P

.png”>

.png”>

0 Q** Q* Q Quantity of discharge
a.
If there are no restrictions on pollution, what
amount is discharged?
b.
What is the quantity supplied and the quantity
demanded if the government restricts the amount of discharge to Q* but gives
the permits away?
c.
Where is market equilibrium if the government
sells the permits? Illustrate this on
the graph.
d.
What happens to market equilibrium if the
government reduces the amount of discharge permitted to Q**? Illustrate this on the graph
8) Four federal laws and subsequent amendments
underpin U.S environmental protection.
Identify these laws.
9) The value
of a home depends in part on how attractive other homes and yards in the
neighborhood are. How do local zoning
ordinances try to promote land uses that generate external benefits for
neighbors?

Order your essay today and save 30% with the discount code: ESSAYHELP
Order your essay today and save 30% with the discount code: ESSAYHELPOrder Now