micro a1 - YISS 2011, Principle of microeconomics...

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YISS 2011, Principle of microeconomics Assignment 1 Note: This assignment covers chapter 3 – 6, and is due on July 11 (Monday) in class. The solution will be posted in the afternoon, and no submission is allowed once the solution is posted. The marked assignment will be returned by July 13. Note that the midterm exam covers up to chapter 9 (or to chapter 7 depending on the speed of lecture). Q1 (5 marks). Which of the following statements is FALSE? (A) In a free market system, the basic economic questions are answered without the help of a central government plan or directive. (B) Individuals guided by their own-self interest will produce products and services that other people want. (C) The basic coordinating mechanism in a free market system is quantity adjustments toward equilibrium. (D) In a free market system, competition forces firms to adopt efficient production techniques. Q2 (15 marks). Lettuce and spinach are substitutes. Lettuce and tomatoes are complements. Lettuce is a normal good. During the winter, about 20% of the lettuce crop was destroyed by flooding. (you fill out either “increase” or “decrease” in the underlined parts.) 2.1. As a result of the flooding during the winter, you would expect that the supply of lettuce would ________, the price of lettuce would ________, and the quantity demanded of lettuce would ________. 2.2. The floods that destroyed part of the lettuce crop would have caused the equilibrium price of spinach to ________ and the equilibrium quantity of spinach to ________. 2.3. The floods that destroyed part of the lettuce crop would have caused a(n) ________ in the demand for tomatoes. 2.4. If at the same time that part of the lettuce crop was destroyed, consumer income also decreased. Then, ceteris paribus , in the market for lettuce this would have caused A) both the equilibrium price and quantity to decrease.
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This note was uploaded on 07/09/2011 for the course ECON econ princ taught by Professor Kim during the Summer '10 term at Yonsei University.

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micro a1 - YISS 2011, Principle of microeconomics...

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