Econ200_Homework1

# Econ200_Homework1 - Econ 200 Homework 1   ...

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Unformatted text preview: Econ 200 Homework 1    Chapter 1 problems: 1, 10, 11, 14  Chapter 2 problems: 5    1). For Christmas your parents got you a \$50 sweater you’re considering returning.    a). What’s the opportunity cost of keeping the \$50.    b). When you go to the store, they have a different sweater you like better for \$60.  If  you trade in the sweater you got as a gift, how much does the new sweater cost  you?    c). To go to the store to return the sweater (forget the new sweater), you’d have to  take an hour off of your \$15/hour job. What is the cost of keeping the sweater?      2). Explain what economists mean by “the law of diminishing marginal value” and why we  say that “price equals marginal value”?      3.)  Cole has the following marginal value schedule for new Gap jeans.  The market price for  Gap jeans is \$50.    Q    MV  1    80  2    75  3    65  4    60  5    57  6    50  7    45  8    35  9    25    a.) How many jeans will Cole purchase, and what is his total expenditure?    b.) What is Cole’s gain (surplus) from this consumption of jeans?    c.) Draw Cole’s demand curve for jeans and label his consumer surplus, total value and  total expenditure when the price of jeans is \$60.    d.) How much surplus would Cole lose if the price of jeans increased from \$50 to \$60?    e.) The Gap in Redmond sells its jeans for \$45, as opposed to the \$50 price in Seattle.  How much would Cole spend to get to Redmond to go shopping?          4.) Bill and Brian have the following marginal value schedule for CDs.  The market price for  CDs is \$15.    Bill      Brian  Q    MV      Q  MV  1    30    1  21  2    27    2  18  3    24    3  15  4    21    4  12  5    18    5  9  6    15    6  6  7    12    7  3  8    9    8  0    a). Draw each of their demand curves.  Assuming they are the only two consumers of  CDs, draw the total market demand for CDs.     b). How many total CDs are purchased?    c). Bill and Brian face the same price of CDs.  Who buys more CDs? What does this  mean about who has the higher marginal value? Total value?      ...
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