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Assignment 1

economic

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YE MIN AUNG
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21 views

Assignment 1

economic

Uploaded by

YE MIN AUNG
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Economics I- Assignment 1 (due on the 30th of October 2023)

Use the following data to work questions 1 and 2.


Fadi can produce 10 baklavas (a Turkish pastry) or 250 bars of chocolate an hour.
Hania can produce 30 baklavas or 90 bars of chocolate an hour.
1. a. Calculate Fadi’s opportunity cost of a baklava and Hania’s opportunity cost of a
baklava. [6 points]
b. If each spends 30 minutes of each hour baking baklavas and 30 minutes
producing chocolate bars, how many baklavas and chocolate bars does each
produce? [6 points]
c. Who has a comparative advantage in producing (i) baklavas and (ii) chocolate
bars? [6 points]

2. a. Draw a graph of Fadi’s PPF and Hania’s PPF and show the point at which each
produces when they spend 30 minutes of each hour producing baklavas and 30
minutes producing chocolate bars. [6 points]
b. On your graph, show what Fadi produces and what Hania produces when they
specialize. [6 points]
c. When they specialize and trade, what are the total gains from trade? [3 points]
d. If Fadi and Hania share the total gains equally, what trade takes place between
them? [5 points]
3. The figure shows the demand for pens. Calculate the elasticity of demand when
the price rises from $4 to $6 a pen. Over what price range is the demand for pens
elastic? [10 points]
Use Figure 3.4 to work Problems 18 and 19

4. a. Label the curves. Which curve shows the willingness to pay for a pizza? [6
points]
b. If the price of a pizza is $16, is there a shortage or a surplus arise? Does the
price rise or fall? [6 points]
c. Sellers want to receive the highest possible price, so why would they be willing
to accept less than $16 a pizza? [5 points]

5. a. If the price of a pizza is $12, is there a shortage or a surplus and does the price
rise or fall? [6 points]
b. Buyers want to pay the lowest possible price, so why would they be willing to
pay more than $12 for a pizza? [5 points]

6. The table gives the demand and supply schedules for sandwiches.
Quantity Quantity
Price demanded supplied
(dollars per (sandwiches per hour)
sandwich)
0 300 0
1 250 50
2 200 100
3 150 150
4 100 200
5 50 250
6 0 300
a. What is the maximum price that consumers are willing to pay for the 200th
sandwich? [3 points]
b. What is the minimum price that producers are willing to accept for the 200th
sandwich? [3 points]
c. If 200 sandwiches a day are available, what is the total surplus? [3 points]

7. Use the data in the table of Question 6.


a. If the sandwich market is efficient, what is the consumer surplus, what is the
producer surplus, and what is the total surplus? [9 points]
b. If the demand for sandwiches increases and sandwich makers produce the
efficient quantity, what happens to producer surplus and deadweight loss? [6
points]

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