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Microeconomics Assignment -

Question 1: Patty and Ben operate a small company that produces bicycles. Their fixed cost is $ 10,000 per month. They can hire workers for $ 3500 per month. Their monthly production function for bicycles is as given in the following table:

a) For each quantity of labour calculate the following: total product (TP), marginal product (MP), average productivity (AP), average variable cost (AVC), average fixed cost (AFC), average total cost (ATC), and marginal cost (MC).

b) On one diagram draw the MP and AP.

c) On one diagram draw the AVC, ATC, and MC.

d) At what point does Patty and Ben experience decreasing marginal productivity? At what level of output are ATC minimized?

Question 2: The accompanying table shows five consumers' willingness to pay for one can of cola each as well as five producers costs of selling one can of cola. Each consumer buys at most one can of cola; each producer at most sells one can of cola. The finance minister asks your advice about a 40 cent (.40) excise tax per can. Assume zero administration costs from the tax.

a) Without the excise tax, what is the equilibrium price and equilibrium quantity of cola exchanged?

b) The excise tax raises the price paid by consumers post-tax to .60 and lowers the price received by producers by .20. With the excise tax what is the quantity of cola transacted?

c) Without the excise tax how much individual consumer surplus does each consumer gain? How much with the tax? What is the loss of consumer surplus with the tax?

d) Without the excise tax how much individual producer surplus does each producer gain? How much with the tax? What is the loss of producer surplus with the tax?

e) How much government revenue is produced? What is the dead weight loss to the economy?

Question 3: Using economic analysis discuss the following article regarding minimum wage increases in British Columbia.

Article - B.C.'s move to raise minimum wage to $15.20 by 2021 too slow says B.C. Federation of Labour.

Explain the economic consequences both positive and negative (if any). Why or why not the approach is good? What concerns might you raise? Why?

Question 4: In 2017, The Trump Administration introduced a $ 1.5 trillion-dollar tax cut in the United States. In September 2017, they states that not only would the GOP's tax plan "pay for itself, but it will pay for the debt." They also claimed it would "cut down the deficits by a trillion dollars." Using economic analysis explain why or why not has this has happened?