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# UMass Amherst ECON 103 - Problem Set 1

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1.a. Graph the demand curve for cassoulet.a. )The demand curve has a negative slope.b.) Beyonce will sell 2 servings at \$27.90, 5 servings at \$22.44, and 9 servings at \$16.79c.) If a new study comes out showing cassoulet increases the risk of heart disease, the demandcurve will decrease. If a study comes out showing cassoulet reduces the risk of dementia, thedemand curve will increase.2.a.ServingsTotal WorkersAdditionalWorkers10.30.320.650.3531.040.3941.50.4652.020.5262.630.6173.320.6984.120.895.040.92106.091.05The marginal productivity of labor goes down as more is produced and more workers arehired because each additional serving requires more and more workers to make it.b. To calculate the marginal cost of each serving, we multiplied the workers neededby the cost per worker (\$20) and added the cost of ingredients for that serving(\$5.19 and \$5.53).ServingsTotal WorkersAdditionalWorkersMarginal Cost10.30.311.1920.650.3512.1931.040.3912.9941.50.4614.3952.020.5215.5962.630.6117.7373.320.6919.3384.120.821.5395.040.9223.93106.091.0526.53The MC curve slopes upward because each serving requires more additional workers thanthe previous, which costs more money. As Beyonce produces more and more servings,the slope of the MC curve gets steeper because the rate of additional workers needed foreach serving increases.c. To calculate the marginal cost if each worker gets a raise to \$25 an hour, wemultiplied the workers needed by the cost per worker (\$25) and added the cost ofingredients for that serving (\$5.19 and \$5.53). To calculate the marginal cost ifeach serving is made with only 80% as much labor, we multiplied the workersneeded by 0.8 then multiplied that by the cost per worker (\$25) and added the costof ingredients for that serving (\$5.19 and \$5.53).ServingsTotal WorkersAdditionalWorkersMarginal CostMC at \$25workersMC GreaterProductivity10.30.311.1912.6911.1920.650.3512.1913.9412.1931.040.3912.9914.9412.9941.50.4614.3916.6914.3952.020.5215.5918.1915.5962.630.6117.7320.7817.7373.320.6919.3322.7819.3384.120.821.5325.5321.5395.040.9223.9328.5323.93106.091.0526.5331.7826.53The marginal costs are the same with high wages and high productivity as the initialsituation. As an employer either choice is fine because you make the same amount ofprofit no matter which you choose. As a worker you would prefer the high wages andhigh productivity because you would get paid more. High wages and high productivity isbetter for society because it allows for people to have more money and society to producemore.3.a.Beyonce will sell 7 servings at \$19.41 because that is where the two curvesintersect.b.c. The dollar value of consumer surplus is \$34.83, the dollar value of the producersurplus is \$32.46, and the dollar value of the total social surplus is

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