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8. Elasticity problems:
a. The world demand for crude oil is estimated to
have a short-run price elasticity of 0.05. If the
initial price of oil were $100 per barrel, what
would be the effect on oil price and quantity of
an embargo that curbed world oil supply by 5 per-
cent? (For this problem, assume that the oil-supply
curve is completely inelastic.)
b. To show that elasticities are independent of units,
refer to Table 3-1. Calculate the elasticities between
each demand pair. Change the price units from
dollars to pennies; change the quantity units from
millions of boxes to tons, using the conversion fac-
tor of 10,000 boxes to 1 ton. Then recalculate the
elasticities in the fi rst two rows. Explain why you
get the same answer.
3. Classify each of the following statements as positive or normative. Explain.
a. Society faces a short-run trade-off between inflation and unemployment
b. A reduction in the rate of money growth will reduce the rate of inflation.
c. The Central Bank or Federal Reserve should reduce the rate of money growth.
d. Society ought to require welfare recipients to look for jobs. e. Lower tax rates encourage more work and more saving.
Classify the following topics as relating to microeconomics or macroeconomics.
a. a family’s decision about how much income to save
b. the effect of government regulations on auto emissions
c. the impact of higher national savings on economic growth
d. a firm’s decision about how many workers to hire
e. the relationship between the inflation rate and changes in the quantity of money
An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or wash one car.
a. Calculate how much of each service is produced under the following circumstances, which we label A, B, C, and D: • All three spend all their time mowing lawns. (A) • All three spend all their time washing cars. (B) • All three spend half their time on each activity. (C) • Larry spends half his time on each activity, while Moe only washes cars and Curly only mows lawns. (D)
b. Graph the production possibilities frontier for this economy. Using your answers to part a, identify points A, B, C, and D on your graph.
c. Explain why the production possibilities frontier has the shape it does.
d. Are any of the allocations calculated in part A inefficient? Explain.
- "As long as all resources are fully employed and every firm in the economy is producing its output using the best available technology, the result will be efficient." Do you agree or disagree with this statement? Explain your answer
Name two types of amortized loans.
1.The production department transfers finished goods to the selling department at manufacturing cost plus 25%.
2.Factory overheads under-allocated amount to R10 000.
3.Administrative and selling expenses for the year amount to R300 000.
4.The turnover for the year amounts to R2 125 000.
- Work-in-progress on 1 January 200X and 31 December 200X amounts to R37 500 andR62 500 respectively.
6.Unsold finished goods on 31 December 200X amount to R187 500.
7. Direct material on hand on 31 December 200X amounts to R25 000. There was no direct material on hand on 1 January 200X.
8. Direct wages owing on 1 January 200X and on 31 December 200X amounted to R75 000 and R50 000 respectively.
9. Direct material purchased amounts to R400 000.
10. Direct wages paid amount to R525 000.
11. Factory overheads allocated amount to R125 000.
12. Unrealised profit on 1 January 200X amounts to R25 000.
You are required to :
1.Prepare the manufacturing cost/work-in-progress account in the general ledger.
ABC uses job-order costing. It applies overhead cost to jobs on the basis of direct
labor-hours. The following transactions took place during the year:
A. $300,000 of raw materials were purchased on account
B. Raw materials were issued into production: $90,000 direct materials and
$40,000 indirect materials
C. Labor costs incurred: $40,000 direct, $130,000 indirect, sales commissions
$50,000, administrative salaries $100,000
D. Utility costs for the factory were $60,000
E. Depreciation recorded was $300,000 (70% related to factory; 30% related
to administrative offices)
F. Manufacturing overhead of $715,000 was applied to production. Actual
direct labor-hours incurred were 22,000.
G. Units costing $300,000 were completed and transferred into the finished
goods inventory.
H. Goods with a cost of $150,000 were sold on account for $200,000.
I. Closed the under/overapplied overhead for the year
Suppose the marginal utility and total utility of Peter's weekly consumption of bananas are both positive and that he subsequently consumes fewer bananas per week.What will happen to his marginal utility and total utility of apples?
State any two ways that firms operating under perfect competition can use to increase their profit since they cannot temper with price and quantity
#340153 on Dec 2023