Intermediate Microeconomics: A Modern Approach, Seventh Edition

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Economics 301 – Fall 2007 – PRELIM 1 - J. Wissink – Thursday October 4 Directions: ANSWER ALL THE QUESTIONS. Write legibly, concisely, and coherently. Be sure to label all axes, functions, and variables you use. READ QUESTIONS CAREFULLY. Draw pictures whenever possible. Show all your work! Total time for the test is 75 minutes. Total points on test = 100. TURN IN THESE EXAM QUESTIONS WITH ANSWERS. Please print your name here: _____________________________________________________________ 1. (12pts) 1 Suppose Judit and Jiyoun are considering the allocation of work for TA-ing Econ 301.  Suppose the following information completely summarizes their individual production  functions for two class related outputs; xeroxing problem sets and writing problem sets. JUDIT JIYOUN xeroxing 1  problem set 2 hours 4 hours writing 1  problem set 1 hour 8 hours Jiyoun complains that she wants to quit getting stuck doing so much of the boring and  tedious xeroxing and argues that, since Judit is better at it,  she, i.e., Judit,  should do all of it  – xeroxing and writing.  Evaluate Jiyoun's grievance using concepts developed in class.  Why  should Judit stick to writing problem sets and Jiyoun to the xeroxing? 2. (20pts) Suppose that 1China exports a popular mechanical pencil called the “Writestuff” to the U.S. The U.S. demand and supply curves for Writestuff pencils are as follows: DEMAND: X D = 5 – 1P SUPPLY: X S = -1 + 1P Quantity, X, is in thousands of pencils per week. Price, P, is in dollars per thousand pencils. a. Graph the demand and supply curves for Writestuff pencils and determine the market equilibrium price and quantity . Suppose that the U.S. government decides to protect U.S. pencil manufacturers by imposing a per unit tariff (a tax) on Writestuff pencils. For every thousand Writestuff pencils sold, the seller must pay $ τ per thousand to the U.S. government.
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