Why many small businesses find it difficult to compete in markets where standardized products are being sold
Microeconomics Final Exam Part One
Complete two problems from each set of three. You should complete 12 questions in total.
Please make sure your name appears on at least the first page of your exam. This will expedite posting scores, so I do not have to try and track down nameless exams.
Set One:
What are the five factors that can cause a supply curve to shift to the left?
- The five factors that can cause the supply curve to shift to the left are Income/ Probability, Technology, Prices of other goods, Number of other produces, and Expectations
What are the anticipated effects on equilibrium price and quantity for toilet paper if the shipping cost for paper pulp (primary resource used in the production of toilet paper) is higher?
How would a decrease in income affect a normal good’s equilibrium price and quantity?
Set Two:
Following a price increase from $12 to $15 a ticket, a movie theater sees a decline in ticket sales from 500 per day down to 300 per day. What is the price elasticity of demand? What does this mean to the movie theater owners?
A social media app has decided to increase the prices they charge to advertisers to promote their products on their platform. After increasing those prices by 20%, they see a 25% decline in advertising revenue. What can we infer about the price elasticity of demand? What does this mean to the social media company?
What is meant by “Income Elasticity of Demand” “Necessities” and “Luxuries”?
Set Three:
What is meant by “Marginal Social Benefits” “Negative Externalities” and “the inexorable necessity of choice”?
Why are some behavioral economists describing US Household Savings Rates as representing a market failure?
What is the economic purpose of a carbon tax (tax on energy used from fossil fuel sources)?
Set Four: Time
Fill in the cost function chart below:
Q FC VC TC AFC AVC ATC
1 120 10
2 20
3 27
4 32
5 40
Using the cost chart data from (1) above, maximize the firm’s profits over the range of output levels listed using the following price information:
Q P TR TC Profit
1 60
2 55
3 50
4 45
5 30
Why do so many small businesses find it difficult to compete in markets where standardized products are being sold?
Set Five:
A friend is trying to optimize their utility from their next car purchase. They have narrowed their search down to three alternatives. The first, a car costing $12,000 that your friend believes is worth $18,000 to them. The second, a car costing $20,000 that your friend believes is worth $26,000. The last is a car costing $25,000 but they believe is the value is $35,000. Which car represents the best purchase if their estimated values are correct?
What is meant by “Opportunity cost” “Marginal analysis” and “Utility”?
How can two people both be rational when they look at the purchases made by the other and find them objectionable?
Set Six:
Two applicants for the same job appear reasonably capable and could be hired. One person appears to be more productive, bringing around $200,000 value to the firm. The other is less productive with around $160,000 in value. If the least productive person is asking for a salary of $40,000, what is the maximum salary the more productive person could ask for and still be the preferred candidate?
Olivia and CJ are citizens of two different countries. Olivia is more productive than CJ, averaging 10 yards of cloth or 5 gallons of wine produced each day. CJ is less productive and averages 5 yards of cloth or 1 gallon of wine produced each day. If the two countries start trading with one another, can CJ make a profit from the situation? How? What is the definition of Comparative Advantage?
In the news for the last 20+ months have been a wide array of stories on the Covid Pandemic. Among these is the economic effects of regional lockdowns on product supplies. Adverse supply shocks happened to a wide range of goods. Using elasticity, explain why the price of toilet paper climbed faster than the price of beef?
