1. Expensive Textbooks, Inc. raises the price of their introductory microeconomics textbooks from $400 to $800 and experiences a decrease in sales from 10,000 books this semester to 6,000. Calculate the price elasticity of demand, using the midpoint formula. Make sure you show your work.Is student demand elastic, inelastic, or unit elastic?
2. List two factors that can cause the demand curve to shift, and two that can cause the supply curve to shift in the market for laptops
3. Calculate economic profit for your business if you earn $2 million in revenues, pay your employees $500,000, and have input costs of $200,000. You also have $100,000 in foregone wages.
4. For this firm’s production, what is the marginal product of labor of the third worker? (pic included)
5. What is the profit maximizing number of workers to hire for this firm? (pic included)
6. Calculate economic profit for your business if you earn $2 million in revenues, pay your employees $500,000, and have input costs of $200,000. You also have $100,000 in foregone wages.
7. TRUE/FALSE/ EXPLAIN Consumers maximize utility by ensuring that the marginal utility per dollar they spend is equal across all goods.If instead , the customer can maximize their utility by purchasing more of the X good.8. True/False/Explain –
8. TRUE/FALSE/ EXPLAIN Part of the discussion we have about how to allocate tax dollars involves a debate over how much money we believe should be dedicated to those in need.This requires that we have an understanding of the income distribution, especially those in poverty.
8.B True or False (and explain):When the Lorenz Curve is a straight diagonal line (at 45 degrees), we have complete equality in the income distribution and the Gini Coefficient will be exactly equal to 1.
9. True/False/Explain – The current equilibrium price for the box set of all the seasons of your favorite show is $100.Government decides to impose a sales tax of $10 per unit on this good to encourage you to study more and watch television less!The equilibrium price will rise to $110.
10. True/False/Explain- When quantity demanded is equal to quantity supplied, the market is in equilibrium, resulting in an equilibrium price.When price is below this equilibrium, quantity demanded is greater than quantity supplied, resulting in a shortage of the product.
11. Health insurance markets suffer from a large asymmetry of information that leads to adverse selection in the marketplace. Describe the asymmetric information in the health insurance market.Who is harmed by it?
12. How does this asymmetry in the health insurance markets lead to adverse selection?
13. As an insurance firm, if you expect your high cost customers to cost you $20,000 in medical bills this year and your low cost customers to cost $10,000, how much will you charge for insurance?Assume you can’t tell who is a high cost or a low cost customer, but you are aware that potentially 50% of the market is high cost, and 50% is low cost.You must show your work here for full credit.
14. Unfortunately the price you charge (the one you just calculated) attracts many high cost customers and not very many low cost customers, as depicted in the below graph.Why won’t this result in equilibrium? Identify and explain the equilibrium price and quantity on the graph. (pic included)
15. List two possible solutions private insurance firms have at their disposal to correct the market failure due to the asymmetry of information.
16. Discuss the potential role government has in correcting the market failure present in the insurance markets.What solutions can they provide?What have they done so far?
17. We Don’t Care About the Environment, Inc. manufactures gas guzzling cars in its factory that only get 2 miles per gallon.The production process results in a negative externality in the form of pollution emissions from the factory, as depicted below. What is the efficient price and quantity of cars, according to the graph below? (pic included)
18. Describe the area of deadweight loss on the graph below that results from the market failure due to the negative externality.For example, “below the D curve.”
19. Suggest and discuss two solutions government can impose to correct the market failure in this car market.
20. In a market economy, prices act as signals that encourage resources like labor and capital to flow to their most valuable use – as if by the forces of an invisible hand. Assume that a new study reveals the positive value of a glass of red wine with dinner for your health (!!!).Explain, using the supply and demand model, the effect of this finding on the markets for red wine and its substitute white wine.
21. Discuss how price changes in each market encourage producers of red and white wine to alter their production, leading to a re-allocation of resources to their highest valued use.
22. Any working member of the economy is all too familiar with income taxes – and what they do to our paychecks!Suppose for now that the single and married tax schedules are as follows (these are not the official IRS tables like the ones we worked with in class):
23. You are single and earn $20,000 in income this year.How much do you pay in taxes?Make sure to show your work for full credit.
24. Give some examples of government social assistance programs we discussed in class that income taxes collected by the government may be used for.
25. What are some of the factors government considers (or at least, they should consider) before imposing any tax – sales, income, etc.?
26. Consider a $0.10/pound sales tax on bananas, currently selling for $1.29 a pound. Explain the impact of this sales tax under two different demand conditions – one relatively elastic and one relatively inelastic. Be sure to discuss the impact of the tax on the price of bananas in each scenario.
27. Briefly explain why the imposition of the tax on bananas results in different equilibrium prices when demand is relatively elastic versus relatively inelastic.Be sure to include a discussion of customer versus firm burden in your discussion.
28. As the only producer of an innovative new product that will help students get A’s in all of their classes, Genius Drinks, Inc. operates as a monopoly. Complete four missing cells on table; reference numbers for next question ( pic included)
29. Using the profit maximizing condition, what is the profit maximizing price and quantity for Genius Drinks?Calculate the amount of the profit or loss, making sure to specify a positive value if the company is earning a profit or a negative value if they are earning a loss.
30. For Genius Drinks graph, depicted below, what should curves 1 and 2 be labelled? (pic included)
31 Calculate the amount of profit or loss for Genius Drinks using the graph below.Show your work.32. f the firm is making a loss, will they shut down?Why or why not?Be specific in your explanation, or state ‘not applicable’ if the firm is making a profit.
32 Now assume that instead of a monopoly market, Genius Drinks operates in a perfectly competitive market.What would be the price and quantity in this case?Calculate the dollar value of deadweight loss that results due to the existence of the monopoly.
33 The labor market is a factor market for the purchase of one of the most important inputs to production, labor.
You can graph the labor market using supply and demand curves.What variables go on each axis of the graph?
34 What happens to the quantity of labor supplied and demanded in the labor market if we impose a minimum wage above the equilibrium wage level?Will LS = LD?Why or why not?What is the difference between Ls and LD called?
35 Is it possible for the minimum wage to create low levels of unemployment, or even none at all?Explain using the concept of the firm’s elasticity of labor demand.
36. Think about your favorite podcast from the semester.Summarize it, and discuss its relevance to the models and concepts we learned in class.
37 Opponents of the minimum wage argue that it will lead to increased unemployment in the labor market.Use the monopsony model to discuss how the opposite may actually be true – the minimum wage can increase employment or keep it relatively stable (as we have observed historically) in the labor market.How is this possible?
38 Briefly explain why the imposition of the tax on bananas results in different equilibrium prices when demand is relatively elastic versus relatively inelastic.Be sure to include a discussion of customer versus firm burden in your discussion.
39. Any working member of the economy is all too familiar with income taxes – and what they do to our paychecks!Suppose for now that the single and married tax schedules are as follows (these are not the official IRS tables like the ones we worked with in class):
please put the answer bolded at bottom of the question
-These are short answers they do not have to be super long. Every question length should depend on how much it is asking and how complicated the question is.
– If you are unsure on which graph to use to answer the question you can ask me or if you search it up it will come up with the needed graph just make sure you are using the right one
– Please don’t make it super formal and more casual
– For math problems please show work like this for example; question 1:
- Midpoint elasticity: Q2-Q1/ Q1+Q1/2 divided P2-P1/P2+P1/2
6000- 10000/6000+10000/2 divided by 800-400/800+400/2
-4000/1600/2 divided by 400/1200/2
= -4000/8000 x 600/400
= -6/8
Absolutely no plagiarism