2002 midterm 1

2002 midterm 1 - Elements of Microeconomics Midterm Exam...

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Unformatted text preview: Elements of Microeconomics Midterm Exam March 11, 2002 1. a. What is a production possibilities curve and Why is it shaped as it is? b. For a given set of prices of the goods, show the profit—maximizing combination of the two goods produced. Explain. c. Suppose that the production possibilities curve is in fact a straight line. What does the supply curve for one good look like? Explain. 2. a. Define economic efficiency. State why “absence of waste” is a good catch-phrase to describe economic efficiency. b. Look at the situation below. Is the allocation between these two consumers economically efficient or not? Explain. 0. Think about interviewing a random person you meet while walking across campus. Do you think that you and this person could trade your possessions in such a way as to make one of you better without making the other worse off? Why or why not? 3. The two graphs below depict an economy. a. Depict the same economy using a production possibilities curve and whatever else you need on that graph. b. Now suppose that the price of X1 goes up. i. Why do you think that might happen? ii. In the graph I drew above, depict what happens in the market for X1 and the market .for X2. Explain each briefly. c. Can you redraw my graphs (from part a) showing prices where the supplies of both goods exceed demand? (Physically, of course you can do this; the question is: Does it make economic sense?) Explain 4. There is a firm in a competitive industry which manufactures some specific good X. a. What do we mean by a “competitive industry?” b. Draw the firm’s short-run average and marginal cost curves. State why they are shaped as you have drawn them (both individually and in relationship to one another). 0. Now assume the firm faces some price (you choose). Show the profit-maximizing level of output and show how much profit the firm makes. Explain why that output maximizes profit. ...
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This note was uploaded on 09/29/2009 for the course ME 530.230 taught by Professor Katz during the Spring '09 term at Johns Hopkins.

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2002 midterm 1 - Elements of Microeconomics Midterm Exam...

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