PracticeProblemsMidterm_1 - Practice Problems Midterm 1...

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Practice Problems Midterm 1 Economics 304K:Principles of Microeconomics Prof. Meg Ledyard 1. Mike and Joe mow lawns and plant trees. It takes Mike 1 hr to mow a lawn, and 30 min to plant a tree. It takes Joe 45 min to mow a lawn, and 15 min to plant a tree. a. Suppose that Mike and Joe each have 40 hours to complete these tasks. Compute the amount of lawns they can mow and trees they can plant (separately for each person.) b. Who has absolute advantage in each task? c. Calculate the opportunity costs for each task for each person. d. Who has comparative advantage in each task. e. Suppose that there is now an outside firm that is willing to plant a tree for 5/12 of a lawn mowed. Is Joe willing to take this deal? Is Mike? 2. Consider the perfectly competitive market for gum. Suppose that gum has very inelastic demand, (not completely inelastic) and that supply for gum is elastic (not perfectly elastic). a.
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