Download economics review part 2

ECONOMICS REVIEW PART 2
1.
The demand and supply schedule for submarine sandwiches at FHCI appears
below:
PRICE
2.50
2.25
2.00
1.75
1.50
1.25
1.00
2.
QUANTITY DEMANDED
300
350
400
450
500
550
600
QUANTITY SUPPLIED
1000
900
800
700
600
500
400
a)
What is the equilibrium price of gum?
______________________
b)
What is the equilibrium quantity of gum?
______________________
What would happen to the equilibrium price and quantity of submarines in each
of the following situations?
a)
b)
c)
d)
e)
f)
The FHCI population drops by 400 students.
The cost of the meat in the submarines rises in price.
The wages of ladies working the cafeteria increase by 10%.
The price of submarine buns drops.
Students are required to donate $2 per week to Torch.
Tacos, which are cheaper than submarines, are introduced as an everyday
item.
Economics Review Part 2
3.
Page 2 of 7
Assume that normal supply and demand curves can represent the American
market for beef. As a result of each event below, indicate in which direction the
supply and demand curves will move (right, left, or no change) and what happens
to equilibrium price and quantity.
Event
A. The price of cattle feed rises.
B. People start worrying about the
sanitation in meat slaughtering houses.
C. A severe winter destroys 5% of the
herds.
D. The ban on the use of DES (a
growth hormone used for cattle) is
lifted.
E. In an effort to aid farmers,
government grants a subsidy of $.05 a
pound for beef produced.
F. Government grants farmers a
subsidy of $10 per acre of land they
own.
G. All foreign beef is excluded from
the American market.
H. Per capita income rises.
I. Housewives expect rising beef
prices.
J. Food companies improve the taste
of their soybean meat substitutes.
K. The price of ham falls.
L. A cheap and perfect substitute for
leather is developed.
M. The price of milk decreases and
dairy farmers sell their herds.
N. The price of ketchup (a
complementary good) rises.
O. The government establishes a price
ceiling above equilibrium price.
P. The government establishes a price
ceiling below equilibrium price.
Q. The government sets a price floor
above equilibrium price.
SUPPLY
DEMAND
Q
P
Economics Review Part 2
4.
Page 3 of 7
Suppose an ecologist is studying the population of the golden-throated song
sparrow and he finds the relationships illustrated in the graph below between the
hatch and death rates and population, given that existing food supply, level of
predation, etc., are fixed. a) What will happen if the population is at level a? At
level b? At level c?
a)
b)
Show on the graph what will happen if the food supply increases.
Explain what will happen on the graph if, due to an increase in the use of
pesticides, fewer eggs hatch.
c)
Explain what will happen on the graph if the number of predators
increases.
The Preservation Embalming Company’s cost data have been partially entered in
the table below. Following the sudden and unexpected death of the company’s
accountant, you are called to fill in the missing entries.
5.
Bodies
Embalmed
0
Total
Cost
24
Fixed
Cost
Variable
Cost
ATC
AVC
AFC
MC
30
2
3
4
5
6
50
108
34
55
39.2
47
Economics Review Part 2
6.
Page 4 of 7
You are given the following information about Rubber Duckies, Inc., a firm
which manufactures rubber boats:
Labour
Workers Hired Per Week
1
2
3
4
5
6
7
8
9
10
7.
Output
Rubber Boats Per Week
1
2
5
7
11
14
16
17
18
18
a)
Calculate marginal product and average product.
b)
What is the relationship between average product and marginal product at
output rates below 16 boats per week? Why? What is the relationship
between average product and marginal product at output rates above 16
boats per week? Why?
a)
b)
Copy and complete the following table.
Create a graph showing the demand (average revenue) and marginal
revenue curves.
Explain the relationship between the curves.
Plot and draw the marginal cost and average cost, revenue, and profit
rectangles.
Finally, indicate the profit-maximizing level of output.
Confirm the profit-maximizing level of output using the table.
c)
d)
e)
f)
Profit Maximization Table for Differentiated Portraits
Price (P)
($ per
package)
Quantity
(Q)
(packages)
90
85
80
75
70
65
60
55
1
2
3
4
5
6
7
8
Total
Revenue
(TR)
Marginal
Revenue
(MR)
Average
Revenue
(AR)
Total Cost
(TC)
70
100
120
140
175
230
345
540
Marginal
Cost
(MC)
Average
Cost
(AC)
Total
Profit
(TR-TC)
Economics Review Part 2
8.
Page 5 of 7
Place the following income and expenditure figures for Canada in the appropriate
columns of the table below and calculate the totals. All figures are in billions of
dollars. (8 marks)
Wage and Salaries
Consumer Spending
Corporate Profits
Interest and Rent
Exports
Indirect Taxes
Government Expenditure
Imports
Incomes, Self-employed
Gross Investment
Depreciation
Subsidies
$685
$805
$126
$ 75
$109
$118
$277
$ 14
$ 94
$211
$110
$ 14
GDP, INCOME-BASED
ITEM
AMOUNT
TOTAL
9.
GDP, EXPENDITURE-BASED
ITEM
AMOUNT
TOTAL
Using 1988 as your base year, complete the table below (10 marks).
YEAR
NOMINAL
GDP
(BILLIONS)
INFLATION
RATE FROM
BASE YEAR
1988
1989
1990
1991
1992
1993
$525.85
$545.36
$561.45
$569.84
$604.66
$610.15
3.6%
6.8%
9.4%
14.3%
17.7%
REAL GDP IN
1988
DOLLARS
INFLATION
RATE FROM
PREVIOUS
YEAR
Economics Review Part 2
10.
Page 6 of 7
You are given the following table for an economy which sells 5 items.
ITEM
A
B
C
D
E
a)
1993
1994
1995
QUANTITY
PRICE/UNIT
QUANTITY
PRICE/UNIT
QUANTITY
PRICE/UNIT
27
28
67
25
22
3.20
189.00
75.00
600.00
399.00
25
31
65
27
19
3.25
200.00
78.00
600.00
400.00
31
42
79
47
25
3.50
200.00
81.00
605.00
395.00
Compute the GDP for each of the three years.
1993:___________________
1994:___________________
1995:___________________
b)
With 1994 as the base year, compute the real CPI for 1993 and 1995.
1993 CPI:___________________
1995 CPI:___________________
c)
If a person earns $50 000 in 1994, what would this person wage have to be
in 1995 to keep up with inflation?
NEW WAGE:_______________________
d)
If the wage did keep up with inflation from 1993 to 1994, what was the
1993 wage?
1993 WAGE: ______________________
Economics Review Part 2
11.
Page 7 of 7
You are given the following inflation rate for the years 1994 to 1998. If 1995 is
the base year, what is the CPI for each of the years.
YEAR
INFLATION RATE
1993
0.0
1994
3.4
1995
4.7
1996
3.8
1997
4.2
1998
5.1
CONSUMER PRICE
INDEX
What was the inflation rate from 1993 to 1998?
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