econ midterm 1

econ midterm 1 - Principles of Microeconomics University of...

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Principles of Microeconomics Name: _________________________ University of Southern California TA: _________________________ Econ 203, Professor Russell Mangum First Midterm Exam Instructions: Answer the following questions based on the material covered in Chapters 1-5 in the course text and on topics covered in class. Answer each answer completely, including the factual and/or conceptual basis for your answer. Partial credit may be given for answers that are correct but not complete. 1. A production possibilities table for two products, grain and airplanes, is found below. Usual assumptions regarding production possibilities are implied. Grain is measured in metric tons and airplanes are measured in units of 1,000. 1
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Principles of Microeconomics Name: _________________________ University of Southern California TA: _________________________ Econ 203, Professor Russell Mangum Combination Grain (metric tons) Airplanes (1,000s) A 0 7 B 14 6 C 26 5 D 36 4 E 44 3 F 50 2 G 54 1 H 56 0 (a) Construct a production possibilities curve from this information placing grain on the vertical axis and airplanes on the horizontal axis. (b) What is the opportunity cost of producing the first unit of airplanes? The marginal opportunity cost of producing the fourth unit of airplanes? (c) Show a point U that would indicate unemployed resources. (d) Draw a new curve B that would illustrate the results of improved technology in the production of airplanes, but no change in the production efficiency of grain. (e) Show a point G that is unattainable in the production of airplanes and grain. 2
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Principles of Microeconomics Name: _________________________ University of Southern California TA: _________________________ Econ 203, Professor Russell Mangum 2. Explain how each of the following events would affect production possibilities. (a) The population becomes more educated over time as the number of high school dropouts falls and the number of college graduates rises. (b) The unemployment rate declines from 7.3 to 4.5 percent of the labor force. (c) Businesses and government are unable to solve a major computer problem, thus reducing economic efficiency and national output. (d) Advances in telecommunications and new technology significantly contribute to economic growth over time. (e) The Congress and the President decide to allocate more resources to national defense instead of butter. (f) A nation participates in increased international trade with other nations of the world. 3
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Principles of Microeconomics Name: _________________________ University of Southern California TA: _________________________ Econ 203, Professor Russell Mangum 3. A firm has the choice between producing product A, B, or C. In producing the products the firm faces a weekly cost of $10 for product A, $130 for product B and $200 for product C. The prices received for each product at different quantities are listed in the table below. Output Product A Product B Product C Profit A Profit B Profit C 5 $3.00 $15.00 $35.00 _____ _____ _____ 10 2.00 12.00 20.00 _____ _____ _____ 15 1.25 9.00 10.00 _____ _____ _____ (a) Compute the firm’s profit for A, B, and C and enter this data into the table.
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