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Apple and Samsung both make mobile phones and tablets using labour as an input. The amount of labour hours needed to produce one unit of each type of device is as follows: Hours per unit Mobile Phone Tablet 2 5 Apple Samsung 5 7 Let 14 and 14 denote the labour employment by Apple in the production of mobile and tablet, respectively. Similarly, lm and 1 denote the labour employment by Samsung in the production of mobile and tablet, respectively. It is further given that lm + 14 = 70 and le+ 1 = 70. i. Calculate opportunity cost of each type of device for each company and show that Apple has comparative advantage in producing mobile phones. ii. If each company divides equally the labour available in the production of the two devices, what's the total production of each device in the economy? (2) iii. Suggest an allocation of labour for both the companies such that the total production of each device is higher than that in part (ii). (2)
A change in the price of apples will not cause the supply curve in respect of apples to shift.
true or false
A change in the price of apples will not cause the supply curve in respect of apples to shift.
3. For each of the following characteristics, say
whether it describes a perfectly competitive firm, a
monopolistically competitive firm, both, or neither.
a. sells a product differentiated from that of its
competitors
b. has marginal revenue less than price
c. earns economic profit in the long run
d. produces at the minimum of average total cost in
the long run
e. equates marginal revenue and marginal cost
f. charges a price above marginal cost
3. For each of the following characteristics, say
whether it describes a perfectly competitive firm, a
monopolistically competitive firm, both, or neither.
a. sells a product differentiated from that of its
competitors
b. has marginal revenue less than price
c. earns economic profit in the long run
d. produces at the minimum of average total cost in
the long run
e. equates marginal revenue and marginal cost
f. charges a price above marginal cost
(a) firms face a download sloping demand curve?
economies of scale
Suppose that people derive utility from two goods—housing (H) and all other consumption goods (C).
a. Show a typical consumer’s allocation of his or her income between H and C.
b. Suppose that the government decides that the level of housing shown in part a (say, H*) is ‘‘substandard’’ and requires that all people buy H** > H* instead. Show that this law would reduce this person’s utility.
c. One way to return this person to the initial level of utility would be to give him or her extra income. On your graph, show how much extra income this would require.
d. Another way to return this person to his or her initial level of utility would be to provide a housing subsidy that reduces the price of hous- ing. On your graph, show this solution as well.
Suppose that people derive utility from two goods—housing (H) and all other consumption goods (C).
a. Show a typical consumer’s allocation of his or her income between H and C.
b. Suppose that the government decides that the level of housing shown in part a (say, H*) is ‘‘substandard’’ and requires that all people buy H** > H* instead. Show that this law would reduce this person’s utility.
c. One way to return this person to the initial level of utility would be to give him or her extra income. On your graph, show how much extra income this would require.
d. Another way to return this person to his or her initial level of utility would be to provide a housing subsidy that reduces the price of hous- ing. On your graph, show this solution as well.
6. The owner of a car wash is trying to decide on the number of people to employ based on
the following short-run production function:
Q 5 6L 2 0.5L2
where Q 5 Number of car washes per hour
L 5 Number of workers
a. Generate a schedule showing total product, average product, and marginal product.
Plot this schedule on a graph.
b. Suppose the price of a basic car wash (no undercoating, no wax treatment, etc.)
in his area of business is $5. How many people should he hire if he pays each
worker $6/hour?
c. Suppose he considers hiring students on a part-time basis for $4/hour. Do you think
he should hire more workers at this lower rate? Explain
