1 Fill in the missing blanks XXXXXXXXXXX means that there is nothing to fill in this spot Quantity 0 XXXXXXXXXXX 1 XXXXXXXXXXX 2 XXXXXXXXXXX 3 XXXXXXXXXXX 4 XXXXXXXXXXX 5 XXXXXXXXXXX 6 XXXXXXXXXXX 7 XXXXXXXXXXX 8 XXXXXXXXXXX 9 Total utility 0 XXXXXXXXXXX 200 XXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXX 575 XXXXXXXXXXX 665 XXXXXXXXXXX 735 XXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXX 800 Marginal utility XXXXXXXXXXX XXXXXXXXXXX 150 XXXXXXXXXXX 125 XXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXX 50 XXXXXXXXXXX 40 XXXXXXXXXXX XXXXXXXXXXX 2 Your willingness to pay for oranges is 5 per pound for the first pound and decreases by 1 for each additional pound i e 4 for the second pound If you can purchase as many pounds of oranges you want at 1 per pound what is your consumer surplus 3 In a given country if supply is represented by the equation P 2Q and demand is represented by the equation P 12 Q what are the equilibrium price and quantity Determine the new price and quantity equilibrium when a 1 tax is imposed on sellers 4 Suppose that you plan on growing peas this summer in your back yard to supplement your income Assume that you have already paid 20 to get the garden ready that peas sell for 2 per pound and that you can add fertilizer at a cost of 5 per pound Based on the yield table below how much fertilizer should you add to maximize your summer profit Pounds of fertilizer 0 1 2 3 4 5 6 Pounds of peas 20 30 35 38 39 39 5 39 75 5 From the information in the previous problem what are your total summer profits 6 If supply shifts to the left and demand shifts to the right what can you conclude about the new equilibrium price and quantity relative to the old equilibrium 7 When the price of tennis balls increases what would you expect to happen to the supply and demand of tennis rackets 8 From the information in Problem 3 what would be the excess supply if a price floor is set at 10 What happens if the price floor is set at 4 In each case compare consumer and producer surplus to equilibrium without price floors 9 If price elasticity of demand for peanuts is 4 in absolute value and an increase in percentage change in quantity demanded is 5 percent how much does price change 10 Assume that there is a linear demand curve with vertical intercept at price 10 and horizontal intercept at quantity 20 What are the price elasticities of demand when price is 8 6 4 and 2 11 From the information in the previous question at what price and quantity will total expenditures be maximized 12 If two individuals have demand curves represented by P 10 Q and P 20 2Q what is the total demand Notes Assume that quantity demanded is never negative Graphing the total demand may be easier than representing it algebraically 13 Assume that picture frames sell for 10 each and that hiring an additional worker costs 200 per day Given the production function below how many workers should be hired to maximize profits Workers per day 0 Output picture frames per day 0 1 50 2 150 3 220 4 250 5 275 6 290 7 295 8 298 14 Assume the same information as in the previous problem If the only other cost is a 250 per day rent that has to be paid how much are daily profits for this firm 15 Again use the same information as in Problem 13 Find the FC VC AFC and AVC for each possible number of employees hired Determine the MC per picture frame for each worker hired 16 Assume that you can run your own business and earn 50 000 per year If you could instead be hired by a private company and earn 30 per hour to work at home 40 hours per week 50 weeks per year which would you choose 17 Given the information in the previous problem assume instead that you must commute if you are hired by the private company Assume that each one way commute costs you 60 Which option would you choose 18 If you won a contest that pays you 100 000 per year forever how much is its present value if the interest rate is always at 10 percent 19 If each person in an economy has a comparative advantage in producing some good or service why is trade beneficial 20 Assume that Brett can build 3 computers per day or 6 computer printers per day Assume also that Shannon can build 9 computers per day or 12 computer printers per day Who has absolute advantage in production of each item Who has comparative advantage in production of each item 21 Joe can produce a total of 100 pounds per day of corn peas or a combination of the two If the world price of corn is 1 pound and the world price of peas is 2 pound what should Joe produce when costless trade is possible 22 Using the information in the previous problem assume that Joe produces to maximize his total revenue If he decides to consume 80 pounds of corn how much peas can he consume 23 Assume the information in Problem 3 without a tax Determine consumer surplus and producer surplus if no trade is possible Do the same for this country if the world price is 2 and costless trade can occur How much is imported or exported by this country 24 Assume the same as in the previous problem except a 1 tariff is imposed on all imports What are consumer and producer surplus if trade is possible 25 Do 2 of the Chapter 9 problems p 261 26 Bill and Doris are asked to say yes or no They make their decisions simultaneously If both say yes then Bill gets a payout of 5 and Doris gets a payout of 10 If both say no then Bill gets a payout of 20 and Doris gets a payout of 3 If one person says yes and the other says no then they both get a payout of 12 Answer the following Draw the payoff matrix Find all NE if any Determine if any person has a dominant strategy Is this a prisoner s dilemma Explain Suppose that Doris gets to decide first and Bill will see Doris choice before he makes his decision What should Doris choose What will Bill choose Why 27 Assume that there are 10 people that have positive reservation prices for Darby s Donuts as listed in the following table Assume nobody wants more than one donut Person A B C D E F G H I J Reservation 5 4 3 2 50 2 25 2 1 75 1 50 1 25 1 price If Darby s MC per donut is 0 40 how many donuts will she sell What price will she charge if she must charge the same price to everyone What will her profit be if she has fixed costs of 2 If she can perfectly price discriminate how much will her profit be 28 Using an efficiency argument …