Reference no: EM131644008
Assignment
1. Suppose the marginal cost (MC) of reading is constant at 40 and the marginal benefit (MB) of reading declines over time. The marginal benefit of reading start at (80Y, 0X) and ends at (10Y and 20X). Draw the marginal benefit curve and the marginal cost curve of studying, and identify the efficient amount of reading.
(Note: Axis Y measures both Marginal benefit and marginal cost. Axis X is time in minutes).
2. What might be some of the opportunity costs of attending college for four years?
3. Plot the following data for the annual U.S. demand and supply for model T"cheap cars". (Y= "price" and X= "Quantity demanded and supplied"). (10 points)
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Price ($ K)
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Quantity Supplied (million)
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Quantity Demanded (Million)
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14,000
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12
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1
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10,000
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8.5
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5
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6,000
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5.5
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9
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4,000
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3.5
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11
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2,000
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2
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13
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a. Use the diagram to find the equilibrium price (Pe) and equilibrium quantity (Qe).
b. Will there be a shortage or a surplus if price is fixed at $10,000?
c. Calculate the amount of shortage/surplus if price is fixed at $10,000.
d. Suppose that the U.S. Department of Transportation imposes a costly regulation on manufactures that cause them to reduce supply by 30% at each and every price. Draw the new supply curve on the diagram and indicate the approximate new equilibrium price and equilibrium quantity from the diagram.
I. Has supply changed? Yes No.
II. Has demand changed? Yes No.
III. Has quantity supplied changed? Yes No.
IV. Has quantity demanded changed? Yes No.
4. Use figure 1 to show the effect of a decrease in price of good Y, a substitute for the good X (good X is a "normal good).
5. Use figure 2 to show the effect of an increase in price of an input used to produce good X.
6. Use figure 3 to show the effect of an increase in personal income tax on good X (Assume good X to be inferior).
7. In figure 4, what areas represent the deadweight loss due to the price ceiling of $8?
8. In figure 4, what area(s) represent consumers' surplus at the equilibrium price of $12?
9. In figure 4, what area(s) represent consumers' surplus at controlled price $8?
10. How many fewer units are exchanged because of the price ceiling than ultimately would be exchanged in a free market?
11. Construct a straight-line Production possibility Frontier (PPF) using the data from the table below on the graph provided, and answer questions a-e below.
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Combinations: (Points on PPF)
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Good Y: vertical axis
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Good X: horizontal axis
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A
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60
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0
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B
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50
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5
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C
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40
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10
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D
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30
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15
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E
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20
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20
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F
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10
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25
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G
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0
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30
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a. Find the opportunity cost of 1X in terms of Y?
b. Find one combination of good Y and good X that is unattainable.
c. Find one combination of good Y and good X that is inefficient.
d. Show how PPF would shift as consequence of a technological breakthrough in production of good X only.
e. How many u nits of Y must be given up by moving from point B to E?
Attachment:- Assignment.rar