ECON 10223 Lecture 5: Chapter 3

***** CLEAR ANSWERS AND GRAPHS IF NEEDED********

1.) Consider the discrete Bertrand game described in the Oligopoly lecture notes/video. According to the rules of this game each student selects a number from the set {0,1,2, 3, 4, 5, 6, 7, 8, 9, 10} and is randomly matched with another student. Whoever has the lowest number wins that amount in dollars and whoever has the high number wins zero. In the event of ties, each student receives half their number in dollars. What number would you select if you played this game in our online class? Explain your reasoning.

This is the article work.

Read the following article first "Donald Trump and Janet Yellen Look to Be on a Collision Course" (New York Times Upshot, Jan 21st 2017). Availableonlineat: https://www.nytimes.com/2017/01/18/upshot/donald-trump-and-janet-yellen-look-to-be-on-a-collision-course. html.

And then, explain its relation with Chapters 6 and 8 of the textbook. (**** Chapter 6 is about the 1. labor market, especially the unemployement, how it moves over time, and how its movement affect individual workers. 2. wage and price determination 3. Equilibrium in the labor market, natural rate of unemployment, the rate of unemployement to which the economy tends to return in the medium run). (**** Chapter 8 is about Phillips Curve, the natural rate of unemployment, and inflation)

1. Three fundamental economic questions

A manager asks an employee, "Should we use our research budget to improve the quality of the products we already make, or to develop new products?"

The manager's question is best classified as which one of the following fundamental economic questions?

a)For whom to produce

b)What to produce

c)How to produce

2. Scarcity, opportunity cost, and marginal analysis

Crystal is training for a triathlon, a timed race that combines swimming, biking, and running.

Consider the following sentence: Because her pool sessions are helping her swim more quickly, Crystal plans to reduce by 1 hour per week the time she spends training on the bike and increase by 1 hour the time she spends in the swimming pool; however, her husband says that she should stop doing any biking and running and spend all 20 hours per week in the pool.

Which basic principle of individual choice does Crystal's plan illustrate that her husband's advice does not?

a)People usually exploit opportunities to make themselves better off.

b)Many decisions are made on the margin.

c)Resources are scarce.

d)All costs are opportunity costs.

Juanita is a hard-working college freshman. One Tuesday, she decides to work nonstop until she has answered 250 practice problems for her physics course. She starts work at 8:00 AM and uses a table to keep track of her progress throughout the day. She notices that as she gets tired, it takes her longer to solve each problem.

Use the table to answer the following questions.

1) The marginal, or additional, gain from Juanita’s second hour of work, from 9:00 AM to 10:00 AM, is---------problems.

2) The marginal gain from Juanita’s fourth hour of work, from 11:00 AM to noon, is------------problems.

Later, the teaching assistant in Juanita’s physics course gives her some advice. “Based on past experience,” the teaching assistant says, “working on 62.5 problems raises a student’s exam score by about the same amount as reading the textbook for 1 hour.” For simplicity, assume students always cover the same number of pages during each hour they spend reading.

Given this information, in order to use her 4 hours of study time to get the best exam score possible, how many hours should she have spent working on problems and how many should she have spent reading?

a) 0 hours working on problems, 4 hours reading

b) 1 hour working on problems, 3 hours reading

c) 2 hours working on problems, 2 hours reading

d) 4 hours working on problems, 0 hours reading