Microeconomics

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Daily Homework Assignment Guide

Notice that Daily Homework Assignments generally cover new material. They are designed to help you prepare for class so that class is more meaningful. You should read the new material before completing the homework questions. The assigned videos will also be very helpful as you complete these questions.

 

Daily homework assignments are graded on completion and correctness. Each is worth a maximum of 10 points. If everything is correct, you’ll receive all 10 points. If almost everything is correct and you completed everything, you’ll receive 9/10. If something is correct and you completed everything, you’ll receive 8/10. If nothing is correct but it’s clear that you made a good faith effort on everything, you’ll receive 7/10. ALWAYS give an attempt at everything. The penalty for incomplete work is high.

 

Note the “identifier” for each assignment. It tells you important information. The first number relates to the section from the course (1, 2 or 3). The letter tells you that it’s for Option A students. The number after the letter tells you the chapter. Some chapters have multiple assignments so they have an extra number. Assignment 1.A.1 is for Section 1, Option A students and covers chapter 1. Assignment 1.A.4.1 is for Section 1, Option A students and covers chapter 1 but because there’s an extra number at the end, you can expect another assignment from this chapter (1.A.4.2).

Use this link to get you to the Microeconomics book: https://drive.google.com/file/d/1FJqgRNdBe63oP8NQmv6w3bW6iWqTk-tH/view

Watch these 4 videos to help you with the assignments:

https://youtu.be/kUPm2tMCbGE

https://youtu.be/nKvrbOq1OfI

https://youtu.be/7eZcPs9z9OA

https://youtu.be/BwNzl15NOTI

 

 

SECTION 1          

Identifier Questions Due date
1.A.1

 

Read Chapter 1

Before beginning this assignment, please read chapter 1 and refer to it as you form your answers. Do the best you can without using the internet to help you find answers.

 

Think about your decision to continue your education and take classes at FSCJ this semester. Consider the 10 Principles of Economics as you answer these questions.

1.       What resource that you have do you need to take classes and why is that resource scarce? (There are many. Choose one and focus on it).

2.       Think about that resource. If you had chosen differently, what would you have used that resource to do? Explain why this is the opportunity cost of taking classes this semester for you.

3.       What incentives do you face that encouraged you to take classes this semester? (Again, there are MANY possible answers, discuss a couple of them.)

4.       Everyone in the class has made the same decision that you did – to take classes at FSCJ this semester. Do they face the same resource scarcity as you? Is their opportunity cost the same as yours? Do they face the same incentives? Explain.

1/8

 

 

1.A.2

 

Read chapter 2

Before beginning this assignment, please read chapter 2 and refer to it as you form your answers. Do the best you can without using the internet to help you find answers.

 

Consider Figure 2 in Chapter 2. This is a graph of the Production Possibilities Frontier. Refer to it as you answer these questions.

1.       Define production possibilities frontier.

2.       What are the two goods being produced in Figure 2?

3.       What combination of goods is produced at:

a.        Point A

b.       Point B

c.        Point D

4.       Explain why it’s inefficient to produce at point D.

5.       Explain why it’s impossible to produce at point C.

Now, watch the assigned video called “The Production Possibilities Frontier.” Then, complete the next question

6.       Jack has 10 acres of land. On 1 acre, he can grow 1 bushel of apples or 1 bushel of oranges. Jill also has 10 acres of land. On 1 acre, she can grow 1 bushel of apples or 3 bushels of oranges.

a.        Draw a PPF that shows all of the different combinations of apples and oranges that Jack can produce.

b.       Draw a PPF on a whole new graph that shows all of the difference combinations of apples and oranges that Jill can produce.

1/13
1.A.3

 

 

Read Chapter 3

Before beginning this assignment, please read chapter 3 and refer to it as you form your answers.

 

Jack has 10 acres of land. On 1 acre, he can grow 1 bushel of apples or 1 bushel of oranges.

Jill also has 10 acres of land. On 1 acre, she can grow 1 bushel of apples or 3 bushels of oranges.

1.       Define absolute advantage.

2.       Which producer has the absolute advantage in producing apples? Explain how you know.

3.       Which producer has the absolute advantage in producing oranges? Explain how you know.

4.       Based on the theory of absolute advantage, do these producers have an incentive to trade?

5.       Define comparative advantage.

6.       Before you can determine the comparative advantage in apples, you’ll need to calculate each producer’s opportunity cost of 1 apple so that you can compare them.

a.        What is Jack’s opportunity cost of producing 1 apple? Show your work and/or explain how you know.

b.       What is Jill’s opportunity cost of producing 1 apple? Show your work and/or explain how you know.

c.        Which one has the comparative advantage in producing apples?

7.       Before you can determine the comparative advantage in oranges, you’ll need to calculate each producer’s opportunity cost of 1 orange so that you can compare them.

a.        What is Jack’s opportunity cost of producing 1 orange? Show your work and/or explain how you know.

b.       What is Jill’s opportunity cost of producing 1 orange? Show your work and/or explain how you know.

c.        Which one has the comparative advantage in producing oranges?

8.       Based on the theory of comparative advantage, do these producers have an incentive to trade?

1/15
1.A.4.1

 

Reach chapter 4

Before beginning this assignment, please read chapter 4 and refer to it as you form your answers. Do the best you can without using the internet to help you find answers.

1. Describe the law of demand.

2. Describe the law of supply.

3. Draw a supply and demand diagram. Label each axis, the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity.

4. Consider that a market begins in equilibrium. If there is an increase in demand, it means that the demand curve shifts to the right. This will create a new equilibrium price and quantity.

a. Compared to the old equilibrium price, is the new equilibrium price higher or lower?

b. Compared to the old equilibrium quantity, is the new equilibrium quantity higher or lower?

1/22
1.A.4.2

 

Review chapter 4

1. What causes a movement along a demand curve (aka increase/decrease in quantity demanded)?

2. List the 5 things that cause a demand curve to shift (aka increase/decrease in demand). Hint: use the list in your textbook.

3. What causes a movement along a supply curve (aka increase/decrease in quantity supplied)?

4. List the 4 things that cause a supply curve to shift (aka increase/decrease in supply). Hint: use the list in your textbook.

5. Draw 4 generic supply and demand diagrams, labeled “Graph A”, “Graph B”, “Graph C”, and “Graph D.” On each graph, label both axis, the demand curve, the supply curve, and the equilibrium price and quantity.

6. Use graph A to show an increase in demand (shift). Label the new demand curve and the new equilibrium price and quantity.

a. Compared to the old equilibrium price, did the price increase, decrease, or stay the same?

b. Compared to the old equilibrium quantity, did the quantity increase, decrease, or stay the same?

7. Use graph B to show and decrease in demand (shift). Label the new demand curve and the new equilibrium price and quantity.

a. Compared to the old equilibrium price, did the price increase, decrease, or stay the same?

b. Compared to the old equilibrium quantity, did the quantity increase, decrease, or stay the same?

8. Use graph C to show an increase in supply (shift). Label the new supply curve and the new equilibrium price and quantity.

a. Compared to the old equilibrium price, did the price increase, decrease, or stay the same?

b. Compared to the old equilibrium quantity, did the quantity increase, decrease, or stay the same?

9. Use graph D to show an decrease in supply (shift). Label the new supply curve and the new equilibrium price and quantity.

a. Compared to the old equilibrium price, did the price increase, decrease, or stay the same?

b. Compared to the old equilibrium quantity, did the quantity increase, decrease, or stay the same?

1/27
1.A.6.

 

Read Chapter 6, Price Controls. Stop when you get to taxes.

In the last chapter, we learned how and why markets come to an equilibrium. In this chapter, we consider the impact of price controls. The law of supply and demand means that markets will always try to get to equilibrium. But when it can’t get there (like when there is a binding price control), it will get as close as possible. Before you start this assignment, make sure you read the part of section 6 that deals with price controls and pay careful attention to the difference between price floors and price ceilings and the difference between a binding and nonbinding price control (both for floors and ceilings).

 

Consider the following supply and demand schedule for the market for fast food workers. When there are price controls, please note that the price (the wage) charged in the market might not be the same as the equilibrium price (wage). Think about what price (wage) people will ACTUALLY earn and businesses will ACTUALLY pay in each of the situations described below.

Supply Schedule   Demand Schedule
Price (Wage) QS   Price  (Wage) QD
10 20   10 15
9 18   9 16
8 17   8 17
7 15   7 18
6 12   6 19
5 8   5 20

1.       What is the equilibrium price and quantity?

2.       Is the minimum wage an example of a price floor or a price ceiling?

3.       If the minimum wage were $10, what wage would be charged in the market?

4.       If the minimum wage were $10, what would be the quantity of labor supplied?

5.       If the minimum wage were $10, what would be the quantity of labor demanded?

6.       If the minimum wage were $10, what would be the quantity of labor hired?

7.       If the minimum wage were $10, would there be a shortage, a surplus, or would the market clear?

8.       If the minimum wage were $7, what wage would be charged in the market?

9.       If the minimum wage were $7, what would be the quantity of labor supplied?

10.    If the minimum wage were $7, what would be the quantity of labor demanded?

11.    If the minimum wage were $7, what would be the quantity of labor hired?

12.    If the minimum wage were $7, would there be a shortage, a surplus, or would the market clear?

1/29
1.A.7

 

Read chapter 7

1. What is the formula for consumer surplus, for producer surplus, and for total surplus?

2. Complete the table by calculating consumer surplus, producer surplus and total surplus for each of the following transactions.
Key: P = Price, WTP = willingness to pay, Cost = cost to produce

Quantity Willingness to Pay Price Cost to Produce Consumer Surplus for this transaction Producer Surplus for this transaction Total Surplus for this transaction
First good 10 6 4      
Second good 8 6 5      
Third good 6 6 6      
Fourth good 4 6 7      

3. Draw a generic supply and demand diagram (do NOT try to use the information from #1!). Label each axis, the demand curve, the supply curve, the equilibrium price, and the equilibrium quantity. Label the consumer surplus, producer surplus, and total surplus.

The most important thing about this chapter is that it teaches that the market outcome (the equilibrium) is efficient. Carefully read section 7-3b: Evaluating the market equilibrium. In a few sentences, explain why markets are efficient.

2/3
1.A.9

Read chapter 9

 

Before beginning this assignment, please read chapter 9 and refer to it as you form your answers.

 

Using a supply and demand diagram, draw a graph for a small country that EXPORTS sugar. Be sure that you label the domestic supply, domestic demand, autarky (no trade equilibrium) price, and autarky (no trade equilibrium) quantity. Also, label the world price, quantity produced domestically under free trade, quantity consumed domestically under free trade, and the amount of sugar exported. Finally, label the gains to free trade.

2/5

 

SECTION 2

Identifier Questions Due date
2.A.6

 

Read chapter 6, the sections on tnaxes

Before beginning this assignment, please read chapter 6 and refer to it as you form your answers.

 

1.   Explain why a binding price floor (like the minimum wage) decreases the number of people who get to sell something.

2.   Explain why a binding price ceiling (like rent control) decreases the number of people who get to buy something.

3.   Explain why a nonbinding price control (you may pick either a nonbinding price floor or a nonbinding price ceiling) has no impact on the market.

4.   Your textbook says that a tax drives a wedge between the price that buyers pay and the price that sellers receive. Explain what that means in your own words.

5.   Suppose that the government decides to put a tax of 10% on alcohol. Explain why the price of alcohol will increase as a result of this tax and why that increase will be less than 10%.

2/19
2.A.8

 

Read chapter 8

Before beginning this assignment, please read chapter 8 and refer to it as you form your answers.

 

1. Draw a supply and demand diagram that demonstrates the effect of a tax. Label each axis, the supply curve, the demand curve, the price the buyers pay (on the axis), the price the sellers receive after the tax and the quantity bought/sold (on the axis).

2. Label the government revenue collected by the tax on your diagram.

3. Label the deadweight loss associated by the tax on your diagram.

4. Explain why taxes create a deadweight loss.

2/24

 

 

2.A.10

 

Read chapter 10

Before beginning this assignment, please read chapter 10 and refer to it as you form your answers.

 

1. Using the concept of the bystander, explain why a fire extinguisher has positive externalities. Be very specific in your answer and use full sentences.

2. Draw a graph for a good that has a negative externality. Label the private cost (supply) and private benefit curves (demand). Label the social cost curve or the social benefit curve (whichever is applicable in the case of a negative externality). Label the market price and quantity (equilibrium). Label the socially optimal quantity.

3. When a good has a negative externality, does the market produce too much or too little of the good?

4. What action can a government take to improve the market outcome (to make the market producer closer to the socially optimal quantity).

2/26
2.A.11

 

Read chapter 11

Before beginning this assignment, please read chapter 11 and refer to it as you form your answers.

 

1. Define excludability.

2. Define rivalry.

3. Give an example of a good that is rival and excludable. Explain carefully and fully using complete sentences. What do economists call a good like this (choose from one of the following: public good, private good, common resource, or club good).

4. Give an example of a good that is rival but not excludable. Explain carefully and fully using complete sentences. What do economists call a good like this (choose from one of the following: public good, private good, common resource, or club good).

3/2

 

SECTION 3

Identifier Questions Due date
3.A.13.1

 

Read chapter 13

Before beginning this assignment, please read chapter 13 and refer to it as you form your answers.

 

Suppose that you own a sandwich shop. Your rent is $500 per week. Your labor costs are $100 per worker per week. Your sandwich ingredients are $2 per sandwich. If you have no workers, you produce 0 sandwiches. If you have no workers, you produce 0 sandwiches. If you have 1 workers, you produce 100 sandwiches per week. If you have 2 workers, you produce 250 sandwiches per week. If you have 3 workers, you produce 375 sandwiches per week. If you have 4 workers, you produce 480 sandwiches per week. If you have 5 workers, you produce 520 sandwiches per week.

 

1. Which of the costs described above are fixed costs?

2. Which of the costs described above are variable costs?

3. What is the marginal product of the first worker?

4. What is the marginal product of the second worker?

5. What is the marginal product of the third worker?

6. What is the marginal product of the fourth worker?

7. What is the marginal product of the fifth worker?

8. How many workers will you need if you want to produce 480 sandwiches per week?

9. What is the total fixed cost if you produce 480 sandwiches?

10. What is the total variable cost if you produce 480 sandwiches?

11. What is the total costif you produce 480 sandwiches?

12. What is your average fixed cost if you produce 480 sandwiches?

13. What is the average variable cost if you produce 480 sandwiches?

14. What is the average total costif you produce 480 sandwiches?

3/18

 

 

3.A.13.2

 

Review chapter 13

1. Why does marginal product decline once production reaches a certain level?

2. What happens to fixed costs in the long run?

3. Explain why marginal cost increases when marginal product decreases.

3/23
3.A.14.1

 

Read chapter 14

Before beginning this assignment, please read chapter 14 and refer to it as you form your answers.

1. What are the three characteristics of perfectly competitive firms?

2. Why is marginal revenue equal to price for a perfectly competitive firm?

3. How do perfectly competitive firms choose what price to charge?

4. What is the profit maximizing condition for perfectly competitive firms? (In other words, how do they choose how much to produce?)

5. Suppose a perfectly competitive firm has marginal revenue equal to $4 and marginal cost equal to $2. If this firm decides to increase production, what will happen to its marginal cost? What will happen to its profit? Should it increase production?

6. Suppose a perfectly competitive firm has marginal revenue equal to $4 and marginal cost equal to $6. If this firm decides to increase production, what will happen to its marginal cost? What will happen to its profit? Should it increase production?

3/25
3.A.14.2

 

Review chapter 14

1. Why can’t a perfectly competitive firm earn positive economic profits in the long run? Explain in full sentences. In your answer, include a discussion of free entry.

2. Draw a graph that shows a perfectly competitive firm operating in long run equilibrium. Label the firm’s marginal cost curve, average total cost curve, and demand curve (which is the same as its marginal revenue curve). Label the quantity that the firm will produce and the price that it will charge.

 

3/30
3.A.15.1

 

Read chapter 15

Before beginning this assignment, please read chapter 15 and refer to it as you form your answers. To answer #4, you’ll also need to review chapter 7 (especially section 7-3: Market Efficiency).

1. Perfectly competitive firms are called price takers but monopolies are price makers. Why?

2. Using the Law of Demand, explain why marginal revenue is less than price for monopolies.

3. Go back to chapter 7 and review what it means for a market to be efficient. Why is total surplus maximized at the equilibrium? Hint: it is NOT because the quantity supplied is equal to the quantity demanded.

4. Draw a graph that shows a monopoly (not a natural monopoly) that chooses P and Q to maximize profit. Label the firm’s marginal cost curve, average total cost curve, demand curve and marginal revenue curve. Label the quantity that the firm will produce and the price that it will charge. Label the monopoly’s profit.

5. Label the quantity that maximizes total surplus on your graph. Label the deadweight loss from the monopoly.

4/1
3.A.16

 

Read chapter 16

Before beginning this assignment, please read chapter 16 and refer to it as you form your answers.

1. What are the three characteristics of a monopolistically competitive industry?

2. Think about your last trip to the grocery store’s freezer department. How many different types of ice cream are there? Is there product differentiation? Do you think that ice cream might be a monopolistically competitive industry? Explain using full sentences.

3. Draw the ATC, MC, Demand, and MR curves for a monopolistically competitive firm. Identify the profit maximizing quantity. Identify the price that the firm will charge.

4. Look at your drawing. Does it show a firm earning a positive economic profit, negative economic profit, or economic profit that is equal to zero?

4/6
3.A.17.1

 

Read chapter 17

Before beginning this assignment, please read chapter 17 and refer to it as you form your answers.

1. Define the term “Nash Equilibrium.”

2. What is an oligopoly?

3. Consider the Prisoner’s Dilemma. The police have two suspects who worked together on a crime. Explain why it is in the suspects’ best interest to for each to stay quiet but it is unlikely that either does this. Use full sentences.

4/13

 

 

3.A.17.2

 

Review chapter 17 and the handouts on game theory.

Use this information to complete the questions.

 

Susan and Kim have an assignment that they must do together. They will receive a joint grade on the assignment. The grade that they earn is dependent upon how hard each of them works on the assignment. If they both work hard, they’ll get an A. If one works hard and the other slacks off, they’ll get a B. If they both slack off, they’ll get a C.

 

Susan gets 50 units of happiness from an A, 40 units of happiness from a B and 30 units of happiness from a C. Susan finds that working hard on an assignment costs her 20 units of happiness.

 

Kim gets 60 units of happiness from an A, 40 units of happiness from a B and 20 unites of happiness from a C. Kim finds that working hard on an assignment costs her 10 units of happiness.

 

1. Complete the playoff matrix below.

  Kim
Work Slack
Susan Work Both work hard, they earn an A.

 

Kim’s payout is 50
(60-10)

 

Susan’s payout is 30 (50-20)

 

Susan works hard. Kim slacks. They earn a B.

 

Kim’s payout is:

 

 

Susan’s payout is:

  Slack Susan slacks. Kim _______. They earn a/an______.

Kim’s payout is ____.

 

 

Susan’s payout is ____.

 

Susan ______. Kim _____. They earn a/an _____.

 

 

Kim’s payout is ______.

 

 

Susan’s payout is _____.

 

2. Is work a dominant strategy for Kim? Why or why not?

3. Is slack a dominant strategy for Kim? Why or why not?

4. Is work a dominant strategy for Susan? Why or why not?

5. Is slack a dominant strategy for Susan? Why or why not?

6. Does this game have a Nash equilibrium? How can you tell? If it has one, what is it?

4/15

 

 

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