ECON 1000 Lecture Notes - Lecture 1: Economic Surplus, Economic Equilibrium, Market Power

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yellowyak612

14 Oct 2015

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Answer multiple choice questions (section: on the answer sheet provided (last page). Section a (50 points; 2 points per question) These figures illustrate the production possibilities available to barney and betty with eight hours of labour in their bakery. What is the opportunity cost of one loaf of bread for barney: 1/4 pie, 1/2 pie, 1 pie, 2 pies. What is the opportunity cost of one pie for betty: 1/4 loaf of bread, 3/4 loaf of bread, 1 loaf of bread, 4/3 loaves of bread. 7) market demand is given as qd = 75 p. market supply is given as qs = 3p + 15. What would result if the market price were : a shortage of 20, a surplus of 20, a surplus of 45, a shortage of 45. 9) suppose that when the price of corn is per bushel, farmers can sell 10 million bushels.

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Use the information below to answer the following questions. Fact 1 In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter. 8) Refer to Fact 1. The opportunity cost of producing 1 kilogram of butter is A) 3 loaves of bread for Andy and i loaf of bread for Rolfe. B) 3 loaves of bread for Andy and 1/3 loaf of bread for Rolfe. C) 1 hour for Andy and 1 hour for Rolfe. D) 20 minutes (1/3 hour) for Andy and 1 hour for Rolfe. E) 8 loaves of bread for Rolfe and 24 loaves of bread for Andy.

Use the following information to answer questions 6 and 7.

Consider a model economy with just two individuals, Fred and Wilma. They both like to eat bread and cake. They each bake 10 hours a week. If Wilma spends all her time baking bread, she can bake 5 loaves. If she spends all her time making cakes, she will have 20 cakes. If Fred devotes all his time to bread, he will bake 10 loaves of bread, and if he spends all his time baking cake, he will have 25 cakes.

6. Which of the following statements is NOT true:

1) Wilma has a comparative advantage in cake

2)Wilma has an Absolute advantage in cake

3)Fred has an absolute advantage in bread

4)Fred has a comparative advantage in bread

bronzelizard947

You are given the following production possibilities table for country A and country B in bread and butter production.

	Bread	Butter
A	20	2
B	6	12

1) Which country has an absolute advantage in bread production?

2) Which country has an absolute advantage in butter production?

3) Make an opportunity cost table for the two countries.

4) Which country has a comparative advantage in bread production?

5) Which country has a comparative advantage in butter production?

6) Construct a table of production for the two countries with specialization. What is the total quantity of bread produced and what is the total quantity of butter produced?

7) Write the equation for the production possibility line for country A.

8) If country A chooses to produce 1 unit of butter, what quantity of bread can it produce?

9) Write the equation for the production possibility line for country B.

10) If country B chooses to produce 8 units of butter, what quantity of bread can it produce?

sapphiremarten574

ECON 1000 Lecture Notes - Lecture 1: Economic Surplus, Economic Equilibrium, Market Power

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