MICROECONOMICS WRITTEN ASSIGNMENTS – Spring 2015
I encourage you to work with other classmates on Homework Assignments
Please put the following information on each homework assignment:
 Name
 Homework Assignment #
 Chapter # (if applicable)
 (each bullet point is a problem you will need to answer)
All homework assignments must be turned in separately; for example, do not combine
Homework Assignment #1 and Homework Assignment #2.
You should begin by copying or writing the problem question that I have given you on your
answer paper. (I suggest that you save this Word document electronically and cut and paste)
The text in italics will help you understand what I’m expecting from you. It will also help you to
answer the questions correctly.
Be sure to always answer the “WHY” questions; I need to know what you are thinking. After
cutting and pasting each question you should then answer each question in your own words and not just
word for word what is in the book.
You need to give me complete answers, use proper English and grammar, follow directions, and
show your work at a college level. Partial points may be given.
Homework Assignments may be typed or handwritten (if done neatly). Graphs may be done on
programs like Excel or drawn by hand.
Homework Assignment # 1
Chapter 1
 Explain why we have a problem of scarcity and why this causes us to make choices.
 Page 17, # 6 - Explain the importance of the ceteris paribus assumption and “why” we must use
it to understand the results of an economic model.
Do not just define ceteris paribus; instead explain why we must use it to make sense of what we
are trying to study. Do not just cut and paste an answer out of the book.
 Chapter 1 Appendix
What is the formula we use to calculate the slope of a straight line?
 Chapter 1 Appendix
Page 33, # 16, In Exhibit A-9, what is the slope of straight line AB? Refer to Exhibit A-2 to help
you answer this question.
State the formula to find the slope of a line and show your work so I can see how you got your
answer.
1
Homework Assignment # 2
Chapter 2
 What is an Opportunity Cost (this is not money) and explain it by referring to Exhibit #1 on
page 36.
 A variation of Page 49, # 4 – The following are two separate decisions and both decisions incur
an opportunity cost. Which of the following decisions do you think has the greater opportunity
cost? Why?
a. A decision to use an undeveloped lot in Tokyo’s financial district for an apartment
building.
b. A decision to use a square mile in the desert for a gas station.
NOTE: The answer has nothing to do with which investment would be the most profitable
so do not answer by saying which would make the most money.
You will need to read and understand the material in the chapter so that you know what
opportunity cost is before answering this question. Be sure to answer the “Why” question.
 Answer a variation of question # 6 on page 50. The following is a set of hypothetical production
possibilities for a nation:
Combination Automobiles
Beef
(thousands)
(thousands)
A
0
10
B
2
9
C
4
7
D
6
4
E
8
0
a. Plot these production possibilities data. Draw the graph and show all of your work. It
does not matter what axis you use for autos or beef.
What is the opportunity cost of the first 2,000 automobiles produced? Between which points
is the opportunity costs per thousand automobiles the highest?
b. Label a point F inside the curve. Why is this an inefficient point? Label a point G outside
the curve. Why is this point unattainable? Why are points A through E all efficient points?
c. Does the production possibilities curve reflect the law of increasing opportunity costs?
Explain.
d. What assumptions could be changed to shift the production possibilities curve?
Homework Assignment # 3
Chapter 3
 Page 85, #2. Draw graphs to illustrate the difference between a decrease in the quantity
demanded and a decrease in demand for Mickey Mantle baseball cards. Give a possible reason
for change in each graph. (referring to Exhibit #3 will help you understand how to do this
problem even though you will be showing decreases and not increases) Both question #2
and #4 will require 2 graphs for each (4 graphs total). It is important that you draw arrows on
the graphs to show the direction of movement up or down the demand curve (your arrows
should be placed directly on the demand curve) or the direction that the demand curve is
shifting (arrows should show what direction the demand curve is shifting as in to the left or to
the right).
2
 Page 85, #4. Draw graphs to illustrate the difference between a decrease in quantity supplied
and a decrease in supply for condominiums. Give a possible reason for a change in each graph.
(Exhibit #8 will help you understand how to do this problem even though you will be
showing decreases and not increases) Again, it is important to use arrows to show the
direction of movement along the supply curve or a shift in the supply curve.
 What are the five “Non-price Determinants of Demand” and give a real-world example of how
and why each of these will shift the Demand curve.
Homework Assignment # 4
Chapter 4
 One of the things discussed in this chapter is what we call “Price Ceilings”. An example of this
is Rent Control. Some large cities like New York and San Francisco have rent control. If a city
imposes Rent Control, landlords may not charge above a certain amount for renting their
property. Knowing what you do from reading the chapter, is Rent Control a good or not so
good idea?
To answer this question, and show me that you have read the chapter, you must have a good
understanding of pages 105 to 107.
Homework Assignment # 5
Chapter 5
 What is the formula we should use to calculate the price elasticity of demand? Note: this is the
formula half-way down on page 131.
 Page 149, #4. Consider the following demand schedule:
Price
Quantity
Elasticity
demanded
coefficient
$25
20
>
$20
40
>
$15
60
>
$10
80
>
$5
100
What is the price elasticity of demand between:
a. P = $25 and P = $20?
b. P = $20 and P = $15?
c. P = $15 and P = $10?
d. P = $10 and P = $5?
It is important to draw the demand curve with price on the “y” axis and quantity demanded on
the “x” axis. You will need to use the elasticity formula half-way of the way down on page 131
or your answers will not be correct. For each one of the a, b, c, or d sub-questions, you will
have to change the P1, P2 and Q1, Q2 points in your formula. You must draw the graph and
show your work.
3
 On pages 138 - 140 we study the “Determinants of Price Elasticity of Demand”. Explain the
three determinants that are talked about and why they affect elasticity. Remember, you must
answer the why question.
Homework Assignment # 6
Chapter 6
 Page 165, #8. Consider the table below, which lists James’s marginal utility schedule for steak
and hamburger meals. Given a budget of $45, how many steak and hamburger meals will James
buy per month to maximize his total utility? What is the total utility realized? Show how you
got your answers.
Steak
Marginal
Price
Hamburger Marginal
Price
meals
utility of
per
meals
utility of
per
per
steak
steak
per
hamburger hamburger
month
meals
meal
month
meals
meal
1
20
$10
1
15
$5
2
15
$10
2
8
$5
3
12
$10
3
6
$5
4
10
$10
4
4
$5
5
8
$10
5
2
$5
Duplicate (draw) the table on your paper and answer the questions. The concept of utility and
utils that is talked about in this chapter may seem silly to you, but it really does help us
understand how we think and make choices depending on the circumstances.
4
Homework Assignment # 7
Chapter 7
 Page 202, #6, #a Construct the cost schedule using the data from the operating table below for a
firm operating in the short run (refer to Exhibit #3 on page 189). Fill in all blank areas.
Start by cutting and pasting the table and then you will fill it in with the correct answers
Total
Output
(Q)
0
Total
Fixed
Cost
(TFC)
$50
Total
Variable
Cost
(TVC)
$
Total
Cost
(TC)
Marginal
Cost
(MC)
$50
Average
Fixed
Cost
(AFC)
$
Average
Variable
Cost
(AVC)
$
Average
Total
Cost
(ATC)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
}$
1
$
$
$70
2
$
$
$86
}$
}$
3
$
$
$95
}$
4
$
$
$100
}$
5
$
$
$110
6
$
$
$130
}$
}$
7
$
$
$165
}$
8
$
$
$215
}$
9
$
$
$275
 Page 202, #6, #b Graph the average variable cost, average total cost, and marginal cost curves
(refer to Exhibit #4 on page 190). Put all of these curves on one graph.
Homework Assignment # 8
Chapter 8
 Look at Exhibit # 3 on page 217. Why does the orange area indicate a loss while the green area
indicates a profit? The answer is simple, but you need to tell me why the orange area
indicates a loss is being incurred and the green area indicates a profit is being made.
 Referring to Exhibit #3 on page 217; why is producing at 9 units per hour the most profitable
level of production? The answer to this question should be very detailed and show that you read
and understood the chapter. Be sure to give me a complete answer.
5
We are trying to find the most profitable level of production in order to maximize profits. In
Perfect Competition, this is the only decision we need to make. This process is explained on
page 215 - 218 and is called the Total Revenue-Total Cost Method.
 I looking at Exhibit #4 on page 219, why should our quantity of output be 9 and could we make
a profit at any other level of production?
Homework Assignment # 9
Chapter 9
 Page 263, # 2. Why is the demand curve facing a monopolist downward sloping while the
demand curve facing a perfectly competitive firm is horizontal? Do not just cut and paste the
answer from the book; put the answer in your own words.
You will need a good understanding of Perfect Competition from the last chapter and of
Monopoly from this chapter. The key to this answer is on page 247-248. Keep in mind that this
has to do with what the Monopolist has to do with the selling price if the Monopolist wants to
sell more. Please give me a complete answer.
Homework Assignment # 10
Chapter 10
 Explain what the term “Differentiation” is and why it is important for Monopolistic Competitors
to differentiate their product. Give five examples of real-world businesses and how they attempt
to differentiate their product.
 Think of oligopolies like General Motors and Ford and explain why this condition of “mutual
interdependence” exists. Show me that you understand the definition of “Mutual
interdependence”.
Homework Assignment # 11
Chapter 11
 Page 311, # 2. The Zippy Paper Company has no control over either the price of paper or the
wage it pays its workers. The following table show the relationship between the number of
workers Zippy hires and total output:
Assuming the selling price is $10 per box, answer the following questions:
a. What is the marginal revenue product (MRP) of each worker?
b. How many workers will Zippy hire if the wage rate is $100 per day?
c. How many workers will Zippy hire if the wage rate is $75 per day?
d. Assume the wage rate is $75 per day and the price of a box of paper is $20. How many
workers will Zippy hire?
6
You should start by duplicating the chart on your sheet. You will then need to find the Marginal
Product. Multiplying the Marginal Product by the Price will give you the Marginal Revenue Product.
Labor Input
(workers
per day)
0
Total Output
(boxes of
paper per day)
0
1
15
2
27
3
36
4
43
5
48
6
51
Marginal
Product
Price
Marginal
Revenue
Product
Homework Assignment # 12 (chapters 12 & 13)
Chapter 12
 Do you think we should have perfect income distribution in this country and why do you feel
the way you do? Currently, income gets re-distributed through income taxes, sales taxes, estate
taxes, and things like that. If you don't think we should have "perfect" income distribution; do
you think we should re-distribute income more than we do today. I really want your opinion
here.
To answer this problem intelligently, you will need a good understanding of pages 321-325.
Relate your answer to what you have read in the chapter.
Chapter 13
 Explain why the Sherman Act and the Clayton Act were both important pieces of antitrust
legislation.
You should explain why it was important for Congress to pass these laws.
Homework Assignment # 13 (chapter 15)
Chapter 15
 Page 432, # 2. Bill can paint either two walls or one window frame in one hour. In the same
time, Frank can paint either three walls or two window frames. To minimize the time spent
painting, who should specialize in painting walls, and who should specialize in painting window
frames?
7
To answer this question you must understand the concepts of Opportunity Costs and the
definition of Comparative Advantage. This problem may not seem to make sense to you at first.
Consider that all of us must understand consider what our comparative advantage is to make
the most of our lives and our careers.
Note: You must show your work and explain how you got your answer.
 What is the definition of exchange rates?
 What causes exchange rates between various countries to change on a continuous basis?
To answer this you must understand what is explained on pages 420-424. Exhibit #8 will help
you understand how to answer this question. You really need to answer the “why” question for this
problem.
Homework Assignment # 14 (chapters 16 & 17)
Chapter 16
 Explain the differences between a market economy like the capitalistic United States and the
command economies of socialistic countries like North Korea or the former Soviet Union.
In your explanation, include some description of the strengths and weaknesses of each.
Chapter 17
 Why is GDP (Gross Domestic Product) per capita a pretty good measure of the standard of
living of a country? What are the major problems facing Less-Developed Countries (LDC’s)?
Give some thought to this. Your response should be more than just a few sentences.
8