Download Topic Homework Sets - University of Nevada, Las Vegas

HOMEWORK SETS
FOR
PRINCIPLES OF MICROECONOMICS
(ECONOMICS 102)
Lewis Karstensson, Ph.D.
Department of Economics
University of Nevada, Las Vegas
2005
INTRODUCTION
This packet contains the Homework Sets for the ten topics covered in this
course.
Each set contains (1) a list of Terms to Know, and (2) a set of
Questions and/or Problems for Analysis for a given topic.
It is strongly
suggested that you use the pertinent homework exercises, together with the
text readings and lecture notes, to help you prepare for each course Exam.
You should, in writing, practice defining the terms accurately noting examples
of each where appropriate, answer the questions correctly and work through the
solutions to the problems with as much repetition as is necessary to know the
material.
The process of learning economics is really no different from that
of learning many other things: To learn how to play tennis well, you have to
practice playing good tennis; to learn how to play a piano well, you have to
practice on the piano a lot; and to learn how to do economic analysis
correctly, you have to practice, and practice, and practice, doing economic
analysis correctly, that is, learning the language and tracing through various
analyses with the aid of simple models.
0.1
COURSE TOPICS
The principal topics considered in this course are the following:
______________________________________________________________________________
Topic 1.
1.
2.
Topic 2.
1.
2.
3.
Topic 3.
1.
2.
3.
Introduction to Economics
The Nature of Economics
Varieties of Economic Thought
The Economic Problem
Scarcity and its Consequences
Production-Possibility Analysis
The Assumption of Scarcity
Demand and Supply
The Principle of Demand
The Principle of Supply
Exchange
EXAM 1
Topic 4.
1.
2.
3.
4.
Topic 5.
1.
2.
3.
4.
Utility Theory
Choice Theory, The General Case
Choice Theory, The Major Agents
The Demand Curve
The Assumption of Rationality
Elasticity
Price (Own-Price) Elasticity of Demand
Income Elasticity of Demand
Cross-Price Elasticity of Demand
Elasticity of Supply
EXAM 2
Topic 6.
1.
2.
3.
4.
Theory of Production
The Business Firm
Time Periods in Production
Production in the Short Run
Production in the Long Run
0.2
0.3
Topic 7.
1.
2.
3.
Theory of Cost
Various Cost Concepts
Costs in the Short Run
Costs in the Long Run
EXAM 3
Topic 8.
1.
2.
3.
4.
Topic 9.
1.
2.
3.
Market Structure: Types of Markets
Pure Competition
Monopolistic Competition
Oligopoly
Pure Monopoly
Market Structure: Exchange
The Market (Monopoly) Power Problem
Exchange in Each Type of Market
The Market Power Problem Again: Some Policy Options
Topic 10.
Factor Markets, The Labor Market
1.
2.
3.
The Nature of the Labor Market
The Marginal Productivity Theory
Economics of the Job Interview
EXAM 4 AND DEPARTMENT COMPREHENSIVE EXAM
______________________________________________________________________________
TOPIC 1
INTRODUCTION TO ECONOMICS
Terms to know:
Economics
History of Economic Thought
Microeconomics
Macroeconomics
Quantitative economics
Mathematical economics
Econometrics
Applied economics
Normative economics
Positive economics
Ceteris Paribus
Fallacy of Composition
Thomas Aquinas
Thomas Mun
Adam Smith
Thomas Malthus
David Ricardo
Karl Marx
Ragnar Frisch
Questions and/or Problems for Analysis:
1.
What is economics about?
2.
What is human behavior insofar as economics is concerned?
context do economists examine human behavior?
3.
What are the five principal components of economics?
some detail.
4.
Characterize pre-modern thought on economic matters. Name two
representative pre-modern writers and summarize their economic views.
5.
Characterize modern economics. Modern economics emerged in what time
period and in what environment? Explain. What forces shaped the
development of modern economics?
6.
Note a major contribution of each of the following to modern economics:
Adam Smith, Thomas Malthus, David Ricardo, Karl Marx, and Ragnar Frisch.
7.
"Economics is the study of business enterprise."
statement? Why or why not?
1.1
In what
Explain each in
Is this an accurate
TOPIC 2
THE ECONOMIC PROBLEM
Terms to know:
Wants
Resources (Factors of Production)
Land
Labor
Capital
Entrepreneurship
Scarcity
Economic goods
Free goods
Bads
Opportunity Cost
Production Possibility Curve (PPC)
Technical efficiency
Absolute advantage
Comparative advantage
Questions and/or Problems for Analysis:
1.
Define the condition of scarcity.
condition? Explain each.
2.
Are all things scarce?
3.
"The United States is a country of wealth, abundance, and affluence.
Thus, scarcity does not exist in the United States." Do you agree or
disagree with this statement? Why?
4.
Draw and label a standard production possibility (pp) model for goods
X and Y.
(a)
(b)
(c)
(d)
(e)
(f)
(g)
5.
What are the consequences of this
Explain.
What assumptions underlie the model?
What are on the respective axes?
What does any given point on the pp curve mean?
What does any given point within the pp curve mean?
What does any given point beyond the pp curve mean?
Why is the pp curve concave to the origin? What does a straight
line pp curve imply?
What does a shift outward in the pp curve signify?
The production possibility frontier shows that the economy of
Greater Argon is capable of producing 20 million buns and 6 million
yo-yos (point A on the graph). Or instead, it can produce 10 million
buns and 8 million yo-yos (point B).
(a)
(b)
(c)
Draw a production possibility frontier for Argon showing this
information. (Put yo-yos on the horizontal axis and buns on the
vertical axis.)
What is the slope of the frontier between point A and point B?
What is the opportunity cost of producing an additional yo-yo?
2.1
2.2
6.
Show and explain each of the following using the production
possibilities framework:
(a)
(b)
(c)
(d)
7.
With a given quantity of resources, Sweden can produce 10 bottles
of wine or 40 loaves of bread. With an equal quantity of
resources, Norway can produce 5 bottles of wine or 30 loaves of bread.
(a)
(b)
(c)
(d)
(e)
8.
A disagreement between person A who favors more domestic welfare
spending and person B who favors more national defense spending.
An increase in population in an economy producing tattoos and
earrings.
Technical efficiency in an economy producing DVDs and a composite
good (all other goods).
An economy producing good X and good Y with resources that are
not specialized.
Which country has an absolute advantage in wine production?
Which country has an absolute advantage in bread production?
Which country has a comparative advantage in wine production?
Which country has a comparative advantage in bread production?
What production and trade arrangement will develop under these
conditions according to the principle of comparative advantage?
The following table provides the number of labor-hours required to
produce a laptop computer or a rock music concert in Laputa and
Luggnagg, respectively.
Labor-Hours Required to Produce:
Laptop Computer
Rock Concert
____________________________________________________
Laputa
30
12
Luggnagg
60
15
____________________________________________________
(a)
(b)
(c)
(d)
(e)
Which country has an absolute advantage in computer production?
Which country has an absolute advantage in concert production?
Which country has a comparative advantage in computer production?
Which country has a comparative advantage in concert production?
What production and trade arrangement will develop under these
conditions according to the principle of comparative advantage?
TOPIC 3
DEMAND AND SUPPLY
Terms to know:
Demand
Quantity demanded
Normal good
Inferior good
Substitute good
Complementary good
Supply
Quantity supplied
Equilibrium
Disequilibrium
Equilibrium price
Equilibrium quantity
Shortage
Surplus
Price ceiling
Price floor
Consumers' surplus
Producers' surplus
Questions and/or Problems for Analysis:
1.
Graphically illustrate and explain the concept of demand.
2.
List the determinants of demand. Graphically show the effects of all
possible changes in each determinant on the demand for a hypothetical
good.
3.
Graphically illustrate and explain the concept of quantity demanded.
Other things equal, what causes a change in the quantity of a given good
demanded?
4.
Graphically illustrate and explain the concept of supply.
5.
List the determinants of supply. Graphically show the effects of all
possible changes in each determinant on the supply of a hypothetical
good.
6.
Graphically illustrate and explain the concept of quantity supplied.
Other things equal, what causes a change in quantity of a given good
supplied?
7.
Graphically illustrate and explain the condition of equilibrium in a
static market -- that is, a market with fixed demand and supply
conditions.
8.
Graphically illustrate and explain the possible conditions of
disequilibrium in a static market. In each case, describe the tendency
of the market to move toward equilibrium, assuming an unfettered
(unregulated) market.
3.1
3.2
9.
Graphically illustrate and explain the market effects of setting a price
ceiling for a given good at a level below the equilibrium price.
10.
Graphically illustrate and explain the market effects of setting a price
floor for a given good at a level above the equilibrium price.
11.
Assume a dynamic market -- that is, a market with changing demand and
supply conditions. Graphically, show how the equilibrium price (Pe) and
the equilibrium quantity (Qe) will change in each of the following cases:
Quantity(Qe)
Case
Demand
Supply
Price(Pe)
___________________________________________________________________
(1)
↑
C
_____
_____
(2)
↓
C
_____
_____
(3)
C
↑
_____
_____
(4)
C
↓
_____
_____
(5)
↑
↑
_____
_____
(6)
↓
↓
_____
_____
(7)
↑
↓
_____
_____
(8)
↓
↑
_____
_____
___________________________________________________________________
Note:
↑ = increase; ↓ = decrease; C = remains constant.
12.
Suppose the price of wine in Las Vegas increases from $1.00 per bottle to
$2.00 per bottle. What will happen to the demand for wine in Las Vegas?
13.
Suppose buyer preferences for good X increase. Other things equal, what
effect will this have on the equilibrium price and quantity of good X
exchanged in the market? Show your analysis graphically.
14.
Suppose good X is an inferior good. Other things equal, what effect will
an increase in consumer income have on the equilibrium price and quantity
of good X exchanged in the market? Show your analysis graphically.
15.
Suppose goods X and Y are complementary goods. What effect will an
increase in the price of good Y have on the equilibrium price and
quantity of good X exchanged in the market, other things equal? Show
your analysis graphically.
16.
Suppose resource Y is an input into the production of good X. What
effect will an increase in the price of resource Y have on the
equilibrium price and quantity of good X exchanged in the market, other
things equal? Show your analysis graphically.
3.3
17.
Suppose a technological innovation has been adopted in the industry
producing good X, allowing firms in this industry to produce good X at a
lower cost than before. Other things equal, how would this development
affect the equilibrium price and quantity of good X exchanged in the
market. Show your analysis graphically.
18.
Suppose the sales tax applicable to good X increases from 6 percent to 7
percent. Other things equal, how would this development affect the
equilibrium price and quantity of good X exchanged in the market. Show
your analysis graphically.
19.
Draw a graph representing the market for good X. Label the equilibrium
point in the graph as E1; label the equilibrium price and equilibrium
quantity exchanged as Pe and Qe, respectively; and label the vertical
intercepts of the demand and supply curves as A and B, respectively.
Identify the consumer surplus in this graph. Identify producer surplus
in this graph. Where are the sum of consumer surplus and producer
surplus maximized?
20.
Suppose the demand and supply schedules for bicycles are as follows:
Price
Quantity demanded per year
Quantity supplied per year
___________________________________________________________________
$160
20,000,000
12,000,000
200
18,000,000
14,000,000
240
16,000,000
16,000,000
280
14,000,000
18,000,000
320
12,000,000
20,000,000
360
10,000,000
22,000,000
___________________________________________________________________
(a)
(b)
(c)
(d)
Graph these curves and show the equilibrium price and quantity.
Now, suppose that it becomes unfashionable to ride a bicycle,
so the quantity demanded at each price falls by 4 million bikes
per year. What is the new equilibrium price and quantity?
Show this solution graphically. Explain why the quantity falls
by less than 4 million bikes per year.
Suppose instead that several major bicycle producers go out of
business, thereby reducing the quantity supplied by 4 million
bikes at every price. Find the new equilibrium price and
quantity, and show them graphically. Explain again why quantity
falls by less than 4 million.
What are the equilibrium price and quantity if the shifts
described in parts (b) and (c) happen at the same time? Show
this graphically.
3.4
21.
Suppose the quantity demanded for good X depends on its price (P)
and consumer income (Y) in a linear way:
quantity demanded = Qd = 5 – P + .5(Y)
The quantity supplied also depends on price linearly:
quantity supplied = Qs = 1 + .5(P)
(a)
(b)
(c)
Suppose consumer income is 10. Graph the supply and demand
curves and find the equilibrium price and quantity.
Suppose consumer income rises to 16. Graph the new market
equilibrium and find the new equilibrium price and quantity.
Is good X a normal good or an inferior good? Why?
TOPIC 4
UTILITY THEORY
Terms to know:
Preference system
Benefits
Constraint system
Cost (Monetary cost, time cost, opportunity cost)
Marginal benefit (MB)
Marginal cost (MC)
Equilibrium
Disequilibrium
Household sector (Consumer)
Private business sector (private goods production)
Public sector, government (public goods production)
Private good
Public good
Utility
Marginal utility (MU)
Principle of diminishing marginal utility
Diamond-Water Paradox
Revenue
Marginal revenue (MR)
Social benefit
Marginal social benefit (MSB)
Social cost
Marginal social cost (MSC)
Income effect
Substitution effect
Questions and/or Problems for Analysis:
1.
Explain the theory of choice or the microeconomics of choice in its
general form: Identify the factors that an individual takes into
consideration in making choices. Show the possible equilibrium and
disequilibrium conditions for an individual in the single alternative
case; show this case graphically. Show the possible equilibrium and
disequilibrium conditions for an individual in the multiple alternative
case.
2.
What factors do consumers take into consideration in making their
consumption choices? Show the possible equilibrium and disequilibrium
conditions for a consumer in the single alternative case; show this case
graphically. Show the possible equilibrium and disequilibrium conditions
for a consumer in the multiple alternative case. What does this analysis
suggest as a motive underlying the consumer's choice-making behavior?
3.
What factors do private sector business firms take into consideration in
making their production decisions? Show the possible equilibrium and
disequilibrium conditions for a firm engaged in the production of one
good; show this case graphically. What does this analysis suggest as a
motive underlying a business firm's choice-making behavior?
4.1
4.2
4.
What factors do the various levels of government take into consideration
in making their production decisions? Show the possible equilibrium and
disequilibrium conditions for a governmental agency engaged in the
production of one good; show this case graphically. What does this
analysis suggest as a motive underlying governmental choice-making
behavior?
5.
Give two explanations for the downward sloping demand curve.
6.
Explain the assumption of rationality.
7.
Calculate the numerical values corresponding to the letters in Table 1
below.
Is this a valid assumption?
Table 1: Various Measures of Utility
Units of
Total
Average
Marginal
Good X
Utility
Utility
Utility
Consumed
(Utils)
(Utils)
(Utils)
_____________________________________________
0
0
0
-1
1
1.00
1.00
2
3
(b)
2.00
3
6
2.00
3.00
4
10
2.50
(d)
5
(a)
3.00
5.00
6
19
3.17
4.00
7
22
3.14
3.00
8
24
3.00
2.00
9
25
(c)
1.00
10
25
2.50
0.00
11
24
2.18
(e)
12
22
1.83
-2.00
_____________________________________________
Answers:
(a)_____
(b)_____
(c)_____
(d)_____
(e)_____
4.3
8.
Consider Agatha's utility functions for grapes and oranges given in
Table 2 below. Assume that the prices of grapes and oranges are $1 and
$2 per unit, respectively.
(a)
If Agatha allocates $5 of her weekly food budget to the purchase of
grapes and oranges, what consumption bundle will maximize her
utility?
(b)
What is the total utility of this consumption bundle to Agatha?
Table 2: Agatha's Utility Functions for Grapes and Oranges
Grapes
Units Total Utility (Utils)
____________________________
Oranges
Units Total Utility (Utils)
____________________________
0
0
1
15
2
28
3
39
4
48
5
55
____________________________
0
0
1
22
2
41
3
58
4
73
5
85
____________________________
TOPIC 5
ELASTICITY
Terms to know:
Own price elasticity of demand
Elastic demand
Inelastic demand
Unit elastic demand
Total revenue (total expenditure) test
Coefficient of elasticity
Income elasticity of demand
Cross price elasticity of demand
Elasticity of supply
Questions and/or Problems for Analysis:
1.
Define and explain the meaning of own price elasticity of demand.
2.
Graphically illustrate each of the following: (1) elastic demand,
(2) inelastic demand, (3) unit elastic demand. Show the relationship
between total revenue (total expenditure) and price in each of the
foregoing cases.
3.
Suppose the price of good X increases from $65 to $70 per unit and as a
result the quantity of good X purchased decreases from 2,000 to 1,900
units. Calculate the arc coefficient of elasticity of demand for good X.
Interpret the coefficient.
4.
Suppose the price of good X decreases from $50 to $40 per unit and as a
result the quantity of good X purchased increases from 1,000 to 1,600
units. Calculate the arc coefficient of elasticity of demand for good X.
Interpret the coefficient.
5.
Is the coefficient of elasticity of demand the same as the slope of the
demand curve? Explain.
6.
Define and explain the meaning of income elasticity of demand.
7.
What is the meaning of each of the following:
(1)
(2)
Income elasticity of demand for good X = +2.5
Income elasticity of demand for good X = -2.0
8.
Define and explain the meaning of cross price elasticity of demand.
9.
What is the meaning of each of the following:
(1)
(2)
Cross price
to good Y =
Cross price
to good Y =
elasticity of demand for good X with respect
+1.5
elasticity of demand for good X with respect
-3.0
5.1
5.2
10.
Define and explain the meaning of elasticity of supply.
11.
Graphically illustrate each of the following: (1) elastic supply,
(2) inelastic supply, (3) unit elastic supply.
12.
Suppose the supply of good X is perfectly elastic. What effect will an
increase in preferences for good X have on the equilibrium price and
quantity of good X traded in the market, other things equal? Show your
analysis graphically.
13.
Suppose the supply of good X is perfectly inelastic. What effect will an
increase in the number of buyers in the market have on the equilibrium
price and quantity of good X traded in the market, other things equal?
Show your analysis graphically.
14.
Suppose the demand for good X is perfectly inelastic. What effect will
an increase in the sales tax from 5% to 7% have on the equilibrium price
and quantity of good X traded in the market, other things equal? What
can be said about who bears the burden of the tax in this case? Show
your analysis graphically.
15.
Suppose the demand for good X is perfectly elastic. What effect will an
increase in the sales tax from 5% to 7% have on the equilibrium price and
quantity of good X traded in the market, other things equal? What can be
said about who bears the burden of the tax in this case? Show your
analysis graphically.
TOPIC 6
THEORY OF PRODUCTION
Terms to know:
Firm
Profit / Loss
Normal profit
Economic profit
Profit maximization
Total revenue (TR)
Average revenue (AR)
Marginal revenue (MR)
Total fixed costs (TFC)
Total variable costs (TVC)
Total cost (TC)
Average total cost (ATC)
Marginal cost (MC)
Market period
Short run
Long run
Very long run
Fixed input
Variable input
Production function
Total product (TP)
Average product (AP)
Marginal product (MP)
Principle of diminishing returns
Returns to scale
Questions and/or Problems for Analysis:
1.
What is a firm?
Why is production carried out in firms?
2.
Distinguish between normal profit and economic profit.
3.
What are the two profit maximizing conditions?
conditions graphically.
4.
What are the four time periods used in the analysis of production?
Explain each.
5.
What is the principle of diminishing returns in production?
6.
Illustrate the principle of diminishing returns graphically with
reference to (1) physical product and (2) costs of production.
7.
What is meant by the duality of production and cost?
8.
Explain returns to scale.
9.
Can the world's food supply be grown in a flower pot?
answer.
6.1
Illustrate these
Explain your
6.2
10.
The following table gives revenue and cost data for Phony Cell Inc.,
a small manufacturer of cell phones:
Quantity of Output and Sales (Units) Total Revenue ($) Total Cost ($)
_______________________________________________________________________
0
0
400
1
200
500
2
400
580
3
600
640
4
800
680
5
1,000
700
6
1,200
740
7
1,400
820
8
1,600
1,020
9
1,800
1,320
10
2,000
1,720
_______________________________________________________________________
(a)
(b)
(c)
(d)
(e)
(f)
(g)
11.
What are total fixed costs
At what quantity of output
At what quantity of output
At what quantity of output
At what quantity of output
At what quantity of output
At what quantity of output
for Phony Cell?
and sales is total revenue maximized?
is average total cost minimized?
is average variable cost minimized?
is marginal cost minimized?
and sales is MR = MC?
and sales is total profit maximized?
The following table shows the production function for BigDog Hotdogs,
a hotdog vendor in Las Vegas:
Variable
Fixed
Quantity of
Input
Input
Output per Hour
(Labor)
(Capital)
(Hotdogs)
___________________________________________
0
1
0
1
1
10
2
1
21
3
1
33
4
1
44
5
1
54
6
1
62
7
1
66
8
1
66
9
1
64
10
1
60
__________________________________________
(a)
(b)
(c)
(d)
What is the average product of three workers at BigDog?
What is the marginal product of the fifth worker at BigDog?
Over what range of employment at BigDog do we observe:
(1) Increasing returns to labor?
(2) Decreasing returns to labor?
(3) Negative returns to labor?
Over what range of employment at BigDog do we observe the law of
diminishing returns?
TOPIC 7
THEORY OF COST
Terms to know:
Explicit cost
Implicit cost
Sunk cost
Normal profit
Economies of scale
Diseconomies of scale
Questions and/or Problems for Analysis:
1.
Define each of the following short run cost concepts and graph each with
respect to quantity of output (Q):
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Total Fixed Cost (TFC)
Total Variable Cost (TVC)
Total Cost (TC)
Average Fixed Cost (AFC)
Average Variable Cost (AVC)
Average Total Cost (ATC)
Marginal Cost (MC)
2.
Construct a model (graph) showing the relationships between average
variable cost (AVC), average total cost (ATC), and marginal cost (MC).
What observations are apparent in the model?
3.
What meaning can be attached to that section of a firm's marginal cost
(MC) curve above its average variable cost (AVC) curve? Explain with the
aid of a graph.
4.
Define each of the following long run cost concepts and graph each with
respect to quantity of output (Q):
(1)
(2)
(3)
5.
Long Run Total Cost (LTC)
Long Run Average Total Cost (LATC)
Long Run Marginal Cost (LMC)
Construct a model (graph) showing the relationships between short run
average total cost (ATC) and long run average total cost (LATC). What
does the declining section of the LATC curve show? What does the
increasing section of the LATC curve show?
7.1
7.2
6.
Calculate numerical value for each of the blank spaces in Table 1
below:
Table 1: Cost of Sunbeam Production (From Cucumbers)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Quantity Total Average Total
Average
Average
of
Fixed Fixed
Variable Variable Total Total
Marginal
Output
Cost
Cost
Cost
Cost
Cost
Cost
Cost
______________________________________________________________________
0
$200
--
1
____
____
2
____
3
$ 0
--
____
--
--
30
____
____
____
____
____
50
____
____
____
____
____
____
60
____
____
____
____
4
____
____
66
____
____
____
____
5
____
____
75
____
____
____
____
6
____
____
95
____
____
____
____
7
____
____
125
____
____
____
____
8
____
____
165
____
____
____
____
9
____
____
215
____
____
____
____
10
____
____
275
____
____
____
____
_______________________________________________________________________
TOPIC 8
MARKET STRUCTURE: TYPES OF MARKETS
Terms to know:
Pure competition
Monopolistic competition
Oligopoly
Monopoly
Homogeneous product
Differentiated product
Barrier to entry
Barrier to exit
Questions and/or Problems for Analysis:
1.
List and explain the principal properties of the purely competitive
market.
2.
List and explain the principal properties of the monopolistically
competitive market.
3.
List and explain the principal properties of the oligopoly market.
4.
List and explain the principal properties of the pure monopoly market.
8.1
TOPIC 9
MARKET STRUCTURE: EXCHANGE
Terms to know:
Pure competition
Monopolistic competition
Independent oligopoly
Collusive oligopoly
Kinked demand curve
Cartel
Monopoly
Total Revenue (TR)
Average Revenue (AR)
Marginal Revenue (MR)
Concentration ratio
Informational advertising
Image (persuasive) advertising
Questions and/or Problems for Analysis:
1.
Define the market (monopoly) power problem.
which markets does this problem exist?
2.
Draw a two-panel model (graph) for a firm producing and selling good X in
a purely competitive market. In the first panel show the market for good
X; in the second panel show the firm in long run equilibrium. Show the
effects of an increase in demand for good X in this market. Show the
effects of a decrease in demand for good X in this market. What
conclusions can be drawn from this model?
3.
Under what condition will a competitive firm earning a loss (a negative
profit) continue to operate in the short run? Under what condition will
the same firm shut down? Demonstrate these conditions graphically.
4.
Draw a two-panel model (graph) for a firm producing and selling good X in
a monopolistically competitive market. In the first panel show the firm
realizing economic profit in the short run; in the second panel show the
firm in long run equilibrium. Explain how the firm moves from the former
to the latter state. What conclusions can be drawn from this model?
5.
Draw a model (graph) for a firm producing and selling good X in an
independent (non-collusive) oligopoly market. What conclusions can be
drawn from this model?
6.
Draw a model (graph) for a firm producing and selling good X in a
collusive oligopoly market. What conclusions can be drawn from this
model?
7.
Draw a model (graph) for a firm producing and selling good X in a pure
monopoly market. What conclusions can be drawn from this model?
8.
Examine the economic effects of advertising.
graphically.
9.1
Why is this a problem?
Show these effects
In
TOPIC 10
FACTOR MARKETS (LABOR MARKET)
Terms to know:
Factors of production
Derived demand
Marginal productivity theory
Marginal revenue product (MRP)
Marginal resource cost (MRC)
Questions and/or Problems for Analysis:
1.
Explain the marginal productivity theory of employment and wage
determination.
2.
What meaning can be attached to a firm's MRP curve for labor?
3.
At the conclusion of your college career you will probably enter the job
market and sit for one or more job interviews before landing a position.
Does the marginal productivity theory suggest anything about the central
factors involved in a job interview? Explain. What does the marginal
productivity theory suggest that you, as an individual, do to increase
your probability of having a successful job interview (i.e., getting the
job offer)?
10.1