Microeconomics Answers

: You graduate from college and are offered three jobs (Job A, Job B, and Job C). Assume that they are identical in all respects (duties, benefits, promotion prospects, and so on) except that the salaries differ, as shown below: Job A $150,000 Job B $120,000 Job C $100,000 First, which of the three jobs would you choose? (No, you can’t have all three!) Because you have made a choice, you have incurred an opportunity cost. What is the opportunity cost of your job choice? Comparing benefits and costs, have you made a rational choice?

Find a newspaper article that deals with a change in supply or demand for a product. Illustrate the
changes described in the article with a supply-and-demand graph

Compute the opportunity cost in forgone consumer goods (millions of pounds of butter) for each additional unit of military output (number of planes) produced: Military output
0
Consumer goods output Opportunity cost
100 1
90 ___
2
75 ___
3
55 ___
4
30 ___
5 0
___

: In a hypothetical economy, without taxes, the consumption(C) at different levels of real GDP (Y) is
given here under:
Real GDP Consumption (Rs in Billion)
(Y) (C)
3,000 1,500
5,000 3,000
Determine the size of MPC (Marginal propensity to consume), MPS (Marginal propensity to save) and multiplier

Assume a car dealer in Pakistan imported 20 cars directly from Japan at a cost of Rs.500,000 per
car in 2005. By close of year 2005, 15 cars were sold at Rs.600,000 per car. The remaining 5 cars were
sold in 2006 for Rs.550,000 each. How are the GNP and its major components affected in 2005 and in
2006 through this transaction?

The U.S. government’s “war on drugs” mainly focuses on restricting supply. This drives up prices
and reduces quantity demanded. However, demand for many drugs is price inelastic. That means quantity
demanded does not drop as much as the price rises. The net effect is higher total revenue to drug
producers. Illustrate the said scenario in a graph.

Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes

Q5: (a) Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes.

Q5: (B) Assume a car dealer in Pakistan imported 20 cars directly from Japan at a cost of Rs.500,000 per
car in 2005. By close of year 2005, 15 cars were sold at Rs.600,000 per car. The remaining 5 cars were
sold in 2006 for Rs.550,000 each. How are the GNP and its major components affected in 2005 and in
2006 through this transaction?

Q5: (a) Suppose that in Year 1 a firm produces 5 cars valued at $10,000 each. It has contributed $50,000
to GDP. In Year 2 its contribution is $60,000. Has the firm produced more cars? Why eliminating price
changes allows us to see more clearly whether or not there have been output changes.

Q5: (B) Assume a car dealer in Pakistan imported 20 cars directly from Japan at a cost of Rs.500,000 per
car in 2005. By close of year 2005, 15 cars were sold at Rs.600,000 per car. The remaining 5 cars were
sold in 2006 for Rs.550,000 each. How are the GNP and its major components affected in 2005 and in
2006 through this transaction?

: The U.S. government’s “war on drugs” mainly focuses on restricting supply. This drives up prices
and reduces quantity demanded. However, demand for many drugs is price inelastic. That means quantity
demanded does not drop as much as the price rises. The net effect is higher total revenue to drug
producers. Illustrate the said scenario in a graph.