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Economics 100 Class 2: In-Class Assignment
Form into groups of three or four people. Since this is your first in-class assignment, take a few minutes to introduce yourselves. Then, do the following two questions. Write your answers as a group in the space provided.
1. We have described four factors of production: natural resources, labor, capital, and entrepreneurship. Think of any restaurant you have ever been to: Dennys, MacDonalds, Taco Bell, Pizza Hut, or any other.
Write a list of some of the things used by that restaurant that would qualify as
natural resources.
Write a list of some of the things used by that restaurant that would qualify as labor.
Write a list of some of the things used by that restaurant that would qualify as capital.
Who is the entrepreneur in this restaurant and what does the entrepreneur do?
2. We have defined opportunity cost as the value of everything that is sacrificed when one decides to do something. You have decided to take Principles of Microeconomics this semester. What is the opportunity cost of this decision? Try to consider all of the sacrifices you expect to make. Then, try to put a dollar value on them so that you can determine exactly what you are giving-up.
The opportunity costs are composed of:
I estimate that the dollar value of the opportunity costs of taking Principles of Microeconomics is:
$______Show how you arrived at this number.
3. This class is concerned with rational decision-making. This involves considering the marginal benefit and marginal opportunity cost for each unit. Form into groups. Discuss among yourselves how you would use the procedure for rational decision making in each of the following situations. Then write briefly in the space what you have concluded.
1. A family must decide how many children to have.
2. You have taken a quiz and received a grade of 3 out of a possible 10 points (F). You are allowed to take a second version of the quiz. If you do so, you can raise your grade to a maximum of 7 out of 10 (C) as long as your score on the second quiz is at least 7. Since you scored poorly on the first version, you will need to study carefully. There are 570 maximum possible points in the course. Will you take the second version of the quiz? Why?
3. You are driving home from Phoenix. You stop at a Dennys in a small town for dinner. You have never been in this small town before and are not likely to ever be there again. Your dinner is fine and so is the service. Your bill is $10. Use the procedures for rational decision-making to determine whether or not you will leave a tip for the person who waited on your table.
Economics 100/102 Name______
Class 3: In Class Assignment
1. In each case, state whether you believe the demand for the product is relatively elastic or relatively inelastic? Then, provide reasons for your conclusion.
1. American Online (AOL).for access to the Internet as well as other services
2. Paying a bill by first class mail
3. Services of a doctor to fix a broken arm
4. Services of a doctor for plastic surgery (changing one's appearance)
5. Japanese automobiles (such as Toyota or Nissan)
6. A burger at MacDonalds
7. Use of cigarettes
- Flights on American Airlines to see New York City as a tourist
9. Tickets to the movies
10. Courses at PalomarCollege
Economics 100 Name______
Class 5: In Class Assignment #1
In Class 4, you were given a demand schedule for new homes. Earlier in this chapter, you were given a supply schedule for new homes. These are repeated here.
Price Quantity Demanded Quantity Supplied
1 $340,000 0 14,000
2 $320,000 1000 13,000
3 $300,000 2000 12,000
4 $280,000 3000 11,000
5 $260,000 4000 10,000
6 $240,000 5000 9,000
7 $220,000 6000 8,000
8 $200,000 7000 7,000
9 $180,000 8000 6,000
10 $160,000 9000 5,000
11 $140,000 10000 4,000
12 $120,000 11000 3,000
13 $100,000 12000 2,000
If the price of homes is $320,000, there will be a ______(shortage or surplus?) equal to ______homes.
If the price of homes is $120,000, there will be a ______(shortage or surplus?) equal to ______homes.
The equilibrium price is equal to $______and the equilibrium quantity of homes is equal to ______.
Draw the demand curve and the supply curve on the graph paper on the back of the page. Show the equilibrium price and the equilibrium quantity on the graph.
In Chapter 5, there was a shift in the demand for new homes to the right. The data are given below.
Price The quantity demanded is: The quantity supplied is
Demand1 Demand2
1 $340,000 0 2000 14000
2 $320,000 1000 3000 13000
3 $300,000 2000 4000 12000
4 $280,000 3000 5000 11000
5 $260,000 4000 6000 10000
6 $240,000 5000 7000 9000
7 $220,000 6000 8000 8000
8 $200,000 7000 9000 7000
9 $180,000 8000 10000 6000
10 $160,000 9000 11000 5000
11 $140,000 10000 12000 4000
12 $120,000 11000 13000 3000
Page 2
What is the new equilibrium price? $______
What is the new equilibrium quantity of new homes? ______
Show the shift on the graph on the back of the page. Show the new equilibrium price and quantity of new homes.
Because of the shift in the demand, there is now a ______(shortage or surplus?) equal to ______new homes. This will cause the price of new homes to ______(rise or fall?). The change in the price will ______(increase or decrease?) the quantity demanded for new homes and ______(increase or decrease?) the quantity supplied of new homes.
In Class 5, there was a shift in the supply of new homes to the right. The data are given below:
Price quantity demanded quantity supplied new quantity supplied
1 $340,000 0 14000 16000
2 $320,000 1000 13000 15000
3 $300,000 2000 12000 14000
4 $280,000 3000 11000 13000
5 $260,000 4000 10000 12000
6 $240,000 5000 9000 11000
7 $220,000 6000 8000 10000
8 $200,000 7000 7000 9000
9 $180,000 8000 6000 8000
10 $160,000 9000 5000 7000
11 $140,000 10000 4000 6000
12 $120,000 11000 3000 5000
What is the new equilibrium price? $______
What is the new equilibrium quantity of new homes? ______
On a different graph on the next page, redraw the original demand and supply curves. Then, show the shift in supply. Show the new equilibrium price and quantity of new homes.
Because of the shift in the supply, there is now a ______(shortage or surplus?) equal to ______new homes. This will cause the price of new homes to ______(rise or fall?). The change in the price will ______(increase or decrease?) the quantity demanded for new homes and ______(increase or decrease?) the quantity supplied of new homes.
Class #5: Case Using Demand and Supply Analysis
Assume there is a well-defined geographic area of a city. The area is composed exclusively of apartments and is populated by low-income residents. The people who live in the area tend to stay in that area because (1) they cannot afford to live in other areas of the city, (2) they prefer to live with people of their own ethnic group, or (3) there is discrimination against them in other areas of the city. Rents paid are a very high percent of peoples' incomes.
(1) Would the demand for apartments in this area be relatively inelastic or relatively elastic? State why.
(2) Would the supply of apartments in this area be relatively inelastic or relatively elastic? State why.
(3)Draw the demand and supply curves as you have described them, showing the initial
equilibrium price and quantity. Label carefully.
Price
0 Quantity
(4) Now assume the government creates a rent supplement program. Under this program, the renter is required to pay 30% of income in rent. Any additional rent is paid by the government --- up to a limit. For example, a low-income person with an income of $500 a month would be required to pay $150 in rent (30%). If the rent is $350, the other $200 would be paid by the government. Analyze the results of this program. Show the changes on the graph and explain what will result. Who gains and who loses from this program?
(5) Instead, now assume that the government decides to provide a building subsidy to people who build apartments in this low-income area. A certain percent of their costs will be paid by the government. Analyze the results of this program. Show the results on the graph and explain what will result.
Economics 100 Class 6 In Class Assignment #1
Under the Immigration Act of 1990. the United States grants permits for legal immigration to approximately 800,000 people each year (not considering refugees). While there is a great opportunity cost for people migrating to the United States, the charge for the permit is virtually zero.
(1) Draw the demand for immigration rights into the United States on the graph. Draw the supply as perfectly inelastic (at 800,000 permits). Show that, at a price of zero, there is a large shortage.
Price
0 Quantity
(2) Since there is a price ceiling on entry permits, name some ways that the shortage might be resolved. That is, how might it be decided who will be allowed to enter?
(3)Is there a black or gray market in this case?
(4)How might the market be used to resolve the shortage problem? What would be the advantages and the disadvantages of a market solution?
Economics 100 Class 6 In Class Assignment #2
Assume there are two products: gas-guzzling cars and small fuel-efficient cars. Show the demand and supply curves for each on the graphs as well as the equilibrium prices and quantities.
Then, the price of gasoline rises to over $2.00 per gallon as a result of a decrease in the production of oil (oil is used to produce gasoline). Show the changes on the two graphs as well as the new equilibrium prices and equilibrium quantities.
Price Price
0 Quantity 0 Quantity
Gas-Guzzling Cars Fuel-Efficient Cars
When oil becomes scarce, it is desired that people will conserve on oil and oil products. Based on your graphs, does the market lead people to do so? WHY or WHY NOT? What is the function of the price in the case of each type of car?
Economics 100 Class 7 In Class Assignment #1 Name______
Janice decides to quit her $20,000 a year job and open a small store selling high fashion. To start her store, she takes $100,000 out of her savings account. She had inherited this money from her parents. During the first year, her expenses are as follows:
Rent for the Store $15,000
Four Hired Workers $80,000
Clothes $100,000
Accounting Firm $3,000
Electricity $2,000
Insurance $5,000
Janice also works in the store ordering the clothes and doing some selling. During the first year, Janice’s store sold $250,000 worth of clothing.
Her Explicit Costs were $______
Her Implicit Costs were $______
Her Total Economic Costs were $______
Her Fixed Costs were $______
Her Variable Costs were $______
Her Economic Profit was $______
Economics 100 Class 7 In Class Assignment #2
The following is a Production Function for sewing blue jeans in a day:
Capital
(Sewing Machines) Labor (Workers Per Day)
0 1 2 3 4 5 6 7
1 0 15 34 44 48 50 51 47
2 0 20 46 64 72 78 81 80
- Assume that there is only one sewing machine (this is the short-run). Calculate the marginal physical product of each worker:
Labor Marginal Physical Product Marginal Cost
1
2
3
4
5
6
7
- Assume that each worker is paid $80 per day ($10 per hour for an 8-hour shift). Assume also that there are no other variable costs of production besides labor. In the table above, calculate the marginal cost. (Hint: if one worker is paid $80 and produces 15 pairs of blue jeans, the marginal cost of each pair of blue jeans must be $80 divided by 15 = $5.33.)
- If the marginal physical product is rising (falling), the marginal cost must be ______
(______). Answer “rising” or “falling”.
Economics 100 Class #9 In Class Assignment
- San Marcos Market is a grocery store of about 5,000 square feet. Albertsons is a grocery store of about 20,000 square feet. Albertsons can sell groceries at a lower price than San Marcos Market because its costs of production are lower. Explain why Albertson’s costs of production are lower. That is, what cost advantages does Albertsons (or Vons or Ralphs) have just because it is a larger company?
- When new products first are introduced, they are very expensive. So, for example, the first color television sets sold more over $2,000 in today’s money, the first VCRs sold for over $3,000 in today’s money, the first pocket calculators sold for over $300 in today’s money, and so forth. After the products are on the market for awhile, the prices tend to fall greatly. Use the principles of economies of scale and dynamic increasing returns to scale to explain why this phenomenon occurs.
- Recently, there have been many mergers. Large banks have merged with other large
banks. Computer companies have merged with other computer companies. These
mergers are justified by the cost savings that occur if the two competing companies
become one. In this question, let us consider gas stations. Exxon and Mobil, have
merged together into one company, as have Chevron and Texaco. Use the principle of
economies of scale to explain why there might be a reduction in the cost of
production of selling gasoline if these companies merge into one.
- In each case, state whether you believe the industry should be characterized as perfect
competition, pure monopoly, monopolistic competition, or oligopoly. STATE
YOUR REASONS.
1. Growers of avocados ______
2. Fast-food restaurants ______
3. Automobile Producers ______
4. Television stations ______
5. Computer manufacturers ______
6. Owners of Radio Stations ______
7. Producers of Electricity ______
Economics 100 Class #10 In Class Assignment
1. Assume that this housing construction company sells homes in perfect competition at a market price of $200,000 per home.
Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost
0 $200,000 $180,000
1 $200,000 $340,000 $160,000
2 $200,000 $480,000 $140,000
3 $200,000 $600,000 $120,000
4 $200,000 $740,000 $140,000
5 $200,000 $900,000 $160,000
6 $200,000 $1,080,000 $180,000
7 $200,000 $1,280,000 $200,000
8 $200,000 $1,500,000 $220,000
9 $200,000 $1,740,000 $240,000
10 $200,000 $2,000,000 $260,000
11 $200,000 $2,280,000 $280,000
12 $200,000 $2,580,000 $300,000
Fill in the table. Ultimately how many units will be produced?______
What is the Economic Profit? ______
2. Now assume that the market price falls to $160,000. Fill in the table.
Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost
0 $160,000 $180,000
1 $160,000 $340,000 $160,000
2 $160,000 $480,000 $140,000
3 $160,000 $600,000 $120,000
4 $160,000 $740,000 $140,000
5 $160,000 $900,000 $160,000
6 $160,000 $1,080,000 $180,000
7 $160,000 $1,280,000 $200,000
8 $160,000 $1,500,000 $220,000
9 $160,000 $1,740,000 $240,000
10 $160,000 $2,000,000 $260,000
11 $160,000 $2,280,000 $280,000
12 $160,000 $2,580,000 $300,000
How many units will be produced? ______
The economic profits are now equal to $______.
Since there is an economic loss, should the company continue to produce in the short-run? Or should the company shut-down temporarily? ______
Why? ______
Page 2
3. Now assume that the market price falls to $120,000. Fill in the table on the back side.
Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost
0 $120,000 $180,000
1 $120,000 $340,000 $160,000
2 $120,000 $480,000 $140,000
3 $120,000 $600,000 $120,000
4 $120,000 $740,000 $140,000
5 $120,000 $900,000 $160,000
6 $120,000 $1,080,000 $180,000
7 $120,000 $1,280,000 $200,000
8 $120,000 $1,500,000 $220,000
9 $120,000 $1,740,000 $240,000
10 $120,000 $2,000,000 $260,000
11 $120,000 $2,280,000 $280,000
12 $120,000 $2,580,000 $300,000
How many units will be produced? ______
The economic profits are now equal to $______.
Since there is an economic loss, should the company continue to produce in the short-run? Or should the company shut-down temporarily? ______
Why? ______
4. Fill-in the following table. Assume there are 1,000 companies in this industry.
Price Supply of One Company Market Supply Market Demand
$140,000 10,000
160,000 9,000
180,000 8,000
200,000 7 7,000 7,000
220,000 6,000
240,000 5,000
260,000 4,000
280,000 3,000
300,000 2,000
320,000 1,000
340,000 0
The equilibrium quantity produced in the market is ______.
The equilibrium price is $______.
5. What price would have to exist in the market so that each of the 1,000 companies earned an economic profit equal to zero? ______What does “economic profit of zero” mean?______
Economics 100 Class #11 In Class Assignment
The following demand and total cost prevail for a monopolist:
Quantity Price Total Revenue Marginal Revenue Total Cost Marginal Cost
0 $11 $ 7
1$10 $11
2$ 9 $16
3$ 8 $22
4$ 7 $29
5$ 6 $37
6$ 5 $46
7$ 4 $56
Fill in the Table. Remember that the total revenue is equal to the price time the quantity. The marginal revenue is the change in the total revenue from producing one more unit. And the marginal cost is the change in the total cost from producing one more unit.
Using the principles developed in the class, the quantity this monopolist should produce in order to maximize profits is ______.
The price that this monopolist should charge is $______.
The economic profits earned will equal $______.
(Remember that economic profits equal total revenue minus total cost.)
- Explain why the price is greater than the marginal revenue.
2. Explain why this monopolist cannot change any price she wants, such as $11.
Economics 102 Name______
Class #14 --- In-Class Assignment
1. Use the principles of price discrimination to explain the following:
1. Why do students and the elderly pay a lower price for movies than others?
2. Why does SDG&E charge a lower price to business users than to household users?
3. Why do long-distance companies charge a higher price to business users than to
household users?
- Other than cost savings, why do grocery stores charge a lower price to people
who clip coupons than to people who do not?
2. In this section, the reasons for the phenomenon of natural monopolies were described.
The bus system in NorthCounty is a natural monopoly while the airline industry is not. Using the reasons discussed in this section, explain why this is so.
3. In the solid waste and hazardous waste control industries, government environmental regulations have imposed substantial costs on companies. These costs include purchasing control equipment, paying for permits, and hiring lawyers, engineers, and scientists. Before the imposition of these environmental regulations in the 1970s, this was a reasonably competitive industry. Today, two companies control over 50% of the market. Many companies with landfills to dispose of this waste have shut down. The result has been higher prices and increased profits for the two companies. Use the material of this section to explain why the imposition of the environmental regulations would contribute to the domination of a former competitive industry by only two companies. (Hint: the costs imposed by the environmental regulations are fixed costs.)
Economics 100 Assignment for Class #15 Name______
1. Fill in the table below. Assume that all workers are hired in a perfectly competitive labor market at a wage of $9.
Labor Total Product MPP Price MRP MRC = Wage
1 10 $1
2 21 1
3 33 1
4 44 1
5 54 1
6 63 1
7 71 1
8 78 1
How many workers will a profit maximizing employer hire? ______
If the wage were to fall to $8, how many workers would be hired? ______
If the wage were to rise to $10, how many workers would be hired?______
In the graph below, draw the MRP curve and the MRC curve (assuming a wage of $9). Show the profit-maximizing number of workers hired.