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college student has two options for meals: eating at the dining hall for $6 per meal, or eating a
Cup O’ Soup for $1.50 per meal. Her weekly food budget is $60.
a. Draw the budget constraint showing the trade-off between dining hall meals and Cups O’
Soup. Assuming that she spends equal amounts on both goods, draw an indifference curve
showing the optimum choice. Label the optimum as point A.
b. Suppose the price of a Cup O’ Soup now rises to $2. Using your diagram from part (a), show
the consequences of this change in price. Assume that our student now spends only 30 percent
of her income on dining hall meals. Label the new optimum as point B.
c. What happened to the quantity of Cups O’ Soup consumed as a result of this price change?
What does this result say about the income and substitution effects? Explain.
d. Use points A and B to draw a demand curve for Cup O’ Soup. What is this type of good
called?
A detailed lecture note on analysis of variance (ANOVA) along with regression
American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. To keep things simple, assume that each country has 100 million workers.
- For this situation, construct a table analogous to the table in Figure 1.
- Graph the production possibilities frontiers for the American and Japanese economies.
- For the United States, what is the opportunity cost of the car? Of grain? For Japan, what is the opportunity cost of a car? Of grain? Put this information in a table analogous to Table 1.
- Which country has an absolute advantage in producing cars? In producing grain?
- Which country has a comparative advantage in producing cars? In producing grain?
- Without trade, half of each country’s workers produce cars and half produce grain. What quantities of cars and grain does each country produce?
- Starting from a position without trade, give an example in which trade makes each country better off.
explain all other things being equal
A firm is considering to undertake one of these four projects. Recruit new staff. This would generate GH¢ 1,310 profit to the firm. Buy raw materials; which would generate GH¢ 1,420 profit. Pay workers’ bonuses. This would earn the firm GH¢ 1,500. Open another branch; which would make the firm record GH¢ 1,480 as profit. Each of the projects will cost the firm GH¢ 1,000.
(a) Rank the projects in order of importance, from the first to the last
(b) Find the opportunity cost of each project of the first three items in (a). (c) Find the net benefit of each of the first three items in (b) using
(i) direct cost.
(ii) opportunity cost.
(d) From your results in (cii), which project will you recommend to the firm? Explain your answer.
- For each of the following statements, illustrate the effect of each event on the market for red snapper fish and indicate the effects on the equilibrium price and quantity.
- A surgeon general warns that high-cholesterol foods such as beef cause heart attacks.
- A new fishing wire reduces the time taken to harvest fish while at the same time there is a report that persons have developed food poisoning from consuming fish.
Christine and Paul are deciding how to split their time
between writing music and lyrics for their new album. Their
PPFs for 72 h of work are shown. Christine and Paul have to
write music for 8 songs and lyrics for 12 songs (4 songs
already have music). When they are done, they can go to a
private island and relax from all their hard work. It is possible
that they will use more than 72 h.
Once they start writing lyrics and music, assuming their hired
help packs for them and their plane is waiting outside their
door, in how many hours can they board the plane to their
relaxing island getaway?
If the population of India suddenly grew because of a large immigration, what would happen
to wages? What would happen to the rents earned by the owners of land and capital?
Show that a monopolist produces a lower quantity and charges a higher price as compared
to a perfectly competitive firm.
A monopoly firm faces a linear demand curve P = 10 – 0.5 Q. Its MC is constant at Rs. 4.
What is the welfare loss on account of monopoly?
