Micro Concepts Homework
Each letter = 2 points
Graphics are done to scale
Due in class 9/15/14
1
1. Consumer Demand
Fish
a. Suppose that
income is $100, fish
costs $4/kilo, and 200
rice costs $1/kilo.
b. Draw the budget
constraint.
100
c. Draw additional
indifference curves
to show the initial
equilibrium
2
100
200
Rice
2. Consumer Demand
Fish
a. Using the Slide 2,
suppose the price200
of fish falls to
$0.50/kilo.
b. Show the new
equilibrium.
100
c. Does utility
increase or
decrease? Why?
3
100
200
Rice
3. Consumer Demand
Fish
a. Using the Slide 2
parameters,
200
suppose income
doubles.
b. Show the new
equilibrium.
100
c. Does utility increase
or decrease? Why?
4
100
200
Rice
4. Production
X-Ray machines
a.
b.
c.
d.
5
Suppose a lab wishes to
process 100 X-Rays per
day. Machines rent for 16
$200 per day, workers
are paid $150 per day.
Show an expenditure
line for $1800 per day.
Calculate the least cost 8
combination of
machines and labor to
produce 100 X-rays.
Indicate X*, T*, and E*.
Q=150
Q=200
Q=100
8
16
Technicians
5. Production
X-Ray machines
a.
b.
c.
6
Starting with Slide 5,
suppose that
16
technicians negotiate a
pay raise to $200 per
day.
Calculate the least cost
combination of
8
machines and labor to
produce 100 X-rays per
day.
Indicate X*, T*, and E*.
Q=150
Q=200
Q=100
8
16
Technicians
6. Production
X-Ray machines
a. Starting with Slide 5,
suppose that
16
technicians
negotiate a pay raise
to $200 per day.
b. Calculate the least
cost combination of
machines and labor 8
to produce 150 Xrays per day.
c. Indicate X*, T*, and
E*.
7
Q=150
Q=200
Q=100
8
16
Technicians