Download Problem Setsz

1. _____/15
2. _____/30
3. _____/15
4._____/15
5._____/15
6._____/ 20
7._____/10
8._____/20
9._____/10
Name: _________________________
Total: _____/150
Unit III: Microeconomics
1. Explain an example that demonstrates the “real world” application of each of the following. Define the
terms in your own words and USE EXAMPLES that clearly demonstrate your understanding of each
concept. (Due 4/24)
a. Explicit and Implicit Costs (____/5)
b. The Law of Diminishing Marginal Returns (____/5)
c. Fixed Costs, Variable Costs, and Total Cost (____/5)
2. Below is information regarding Cory’s Surfboard Inc. Complete the table and do the following (4/24)
a. Fill out the rest of the information in the table (____/10)
b. What is the fixed cost for Cory’s Surfboard Inc? (____/5)
c. EXPLAIN what would happen to Cory’s per unit cost if the price of Styrofoam blanks (a variable
input) increases. How would the cost change if there were an increase in his rent (a fixed input)?
Explain why the results are different. (____/10)
d. If the market for surfboards was perfectly competitive and the market price was $150, how many
surfboards should Cory make and how much profit will he make for EACH surfboard? (_____/5)
Total
Variable
Total Cost Average Fixed
Average
Average Total
Marginal
Product Costs (TVC)
(TC)
Cost (AFC)
Variable Cost
Cost (ATC)
Cost (MC)
(AVC)
0
$0
$100
1
60
2
90
3
130
4
180
5
250
6
340
7
490
8
680
3. Perfect competition (4/28)
a. Define the characteristics of a perfectly competitive market (____/5)
b. Why are perfectly competitive firms price takers? (_____/5)
c. Why are their low barriers of entry to a perfectly competitive market? (____/5)
4. Monopolies (4/30)
a. Define the characteristics of a monopoly (____/5)
b. Why are monopolies price makers/searchers? (_____/5)
c. Give 3 examples of possible barriers to entry for a monopoly (_____/5)
5. Monopolistic Competition (5/2)
a. Define the characteristics of monopolistic competition (____/5)
b. Why are they price makers/searchers? (____/5)
c. What characteristics do they share with perfect competition? Which characteristics are different?
(____/5)
6. Oligopoly (5/6)
a. Define the characteristics of a oligopolistic market (____/5)
b. Why are they price makers/searchers? (____/5)
c. Why does price discrimination occur? (____/5)
d. Why would firms in an oligopolistic market collude (____/5)
7. Define the term and explain a situation that demonstrates the ‘real world’ application of each of the
following. Make sure your example clearly demonstrates your understanding of each concept. (5/12)
a. Marginal Revenue Product (MRP) (____/5)
b. Marginal Resource Cost (MRC) ( ____/5)
8. Use the chart regarding a perfectly competitive Yo-Yo factory to complete the following: (5/12)
a. Fully explain why the number of yo-yos produced increases at a decreasing rate as more workers are
hired. Identify and explain the three stages of returns. ( ____/5)
b. Explain how a firm decides how many workers to hire. If the wage was constant at $25 per day, how
many workers should be hired? Explain how you got your answer. ( ____/5)
c. Assume there is an increase in demand of yo-yos and they are now $3 each. Explain how the level of
employment be affected. How many workers should be hired? Why did it change? ( ____/5)
d. Complete the chart below. ( _____/2)
Number of
Workers
0
1
2
3
4
5
6
7
8
9
Output
(Quantity)
0
20
50
70
85
95
100
103
104
100
Marginal
Product
-----
Price of
Yo-Yos
$2
Total
Revenue
Marginal
Revenue Product
----
9. Complete the attached 2 page worksheet entitled, “How Wages are Determined in Competitive Labor
Markets.” ( _____/15)