Answer all of the following questions. This assignment covers Chapters 1 through 6 in the textbook (in Mankiw, Principles of Microeconomics).
Define scarcity. Provide examples of goods that are not scarce.
How does Adam Smith’s concept of the invisible hand explain why markets move toward equilibrium? Do market participants need to know about the invisible hand for it to function? Explain your answer.
Use the demand curve graph found at the following link to answer the questions below: Demand Curve.
How would point A be represented as an ordered (x,y) pair?
What does this D1 curve show?
Does this D1 curve show a positive or negative correlation between price and quantity?
Compute the slope of D1 between points A and C.
What is the slope of D1 between points C and E? Why would you not have to calculate this answer?
What is it called if we move from curve D1 to curve D2?
How do you know that the slope of D2 is the same as the slope of D1?
Use the demand curve graph found at the following link to answer the questions below (same graph as used in previous question): Demand Curve.
Using the midpoint method, calculate the the elasticity of demand between points A and C, C and E, and B and D.
As quantity demanded moves from point A to point E does the elasticity of demand become unitary at some point? Why or why not?
What is the difference between a positive statement and a normative statement? Determine whether each of the following statements is positive or normative.
The minimum wage creates unemployment among young and unskilled workers.
The minimum wage ought to be abolished.
If the price of a product in a market decreases and other things remain equal, quantity demanded will increase.
A little bit of inflation is worse for society than a little bit of unemployment.
There is a trade-off between inflation and unemployment in the short run.
If consumer income increases and other things remain equal, the demand for automobiles will increase.
The U.S. income distribution is not equitable.
U.S. workers deserve more liberal unemployment benefits.
If interest rates increase, investment will decrease.
If welfare benefits were reduced, the country would be better off.
Gary and Diane must prepare a presentation. As part of their presentation, they must do a series of calculations and prepare 50 PowerPoint slides. It would take Gary 10 hours to do the required calculation and 10 hours to prepare the slides. It would take Diane 12 hours to do the calculations and 20 hours to prepare the slides.
How much time would it take the two to complete the project if they divide the calculations equally and the slides equally?
How much time would it take the two to complete the project if they use comparative advantage and specialize in calculating or preparing slides?
If Diane and Gary have the same opportunity cost of $5 per hour, is there a better solution than for each to specialize in calculating or preparing slides?
Thoroughly describe the characteristics of each of the following market types. Give an example of a firm in each market type and explain how it meets the criteria for that market type.
Perfect competition
Monopoly
Oligopoly
Monopolistic competition
Use the graph found at the following link to answer the questions below: Graph. Your answer for each question should be a letter.
The elastic section of the graph is represented by section ___.
The inelastic section of the graph is represented by section ___.
The unit elastic section of the graph is represented by section ___.
The portion of the graph in which a decrease in price would cause total revenue to fall would be ___.
The portion of the graph in which a decrease in price would cause total revenue to rise would be ___.
The portion of the graph in which a decrease in price would not cause a change in total revenue would be ___.
The section of the graph in which total revenue would be at a maximum would be ___.
The section of the graph in which elasticity is greater than 1 is ___
The section of the graph in which elasticity is equal to 1 is ___.
The section of the graph in which elasticity is less than 1 is ___.
Use the graph found at the following link below to answer the questions below: Graph.
What is the effect of a $300 price ceiling on this market? Would this be a binding price ceiling?
What is the effect of a $700 price floor on this market? Would this be a binding price floor?
Why would policymakers choose to impose a price ceiling or price floor on a market?
The government decides that eating ice cream is a socially desirable activity and passes a law giving consumers 50 cents for each ice cream cone they eat. What is likely to happen in the marketplace once this policy is in effect? What are consumers likely to do? How are suppliers likely to respond?