Quiz1_sol - Name 180.102 Elements of Microeconomics Summer...

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Unformatted text preview: Name: 180.102 Elements of Microeconomics Summer 2013 Quiz 1 ( 50/»1‘7‘01483 1. [25 pts] Abigail, Bob and Cecilia are the only workers at the pottery shop ABC, where they make mugs and bowls. The following table shows the productivity of each worker per hour: Abigail Cecilia a) [4 pts] Which worker has the lowest opportunity cost of making a mug, and how much is it? Which worker has the lowest opportunity cost of making a bowl, and how much is it? Cccrlm NS ‘1‘be lowest war-Em? cos-l 4y VVLW% ox mug: V3 o-FabOLdl Bob MS ”‘1 “60‘0““ @fﬁﬁvﬂa Last of ”W6 A. boa/£1 V1 of A W3 b) [6 pts] Suppose each of the workers works 8 hours per day. Draw the daily production possibilities frontier for the pottery shop ABC. Do not forget to label the axes, intercepts and all other relevant points. Indicate which segment represents which worker. .43 W W W \hél /li‘5 91W! (5“on ,2) la?“ \ Ceol ll A (slope. f * 5) 37- 5‘, 6% Bowls c) [3 pts] Suppose that the price of mugs is pmug=\$3 and the price of bowls is pbow,=\$2. On the graph in part (b), draw the highest equal-revenue line that the pottery shop can reach given these prices. What is the slope of this equal-revenue line? (You do not need to derive the slope; simply state what it is.) Sloye 0( eﬁiMQ—Veucnue UM = - % = -2 d) [5 pts] On the same graph, indicate the point of production that the shop will choose. How many mugs and bowls will be produced in total? Are any workers going to specialize in the production of mugs or bowls? If so, which ones? 32. bowls mui Lt8 W55 WW be produced in W Bob will sfeuahzc in Mala/15 bowls while AWN Md (Lu/{Lia W \$11664.”le MW prod/uphold. of Wax. e) [7 pts] Derive ABC’s supply curve for bowls, given the price of mugs is \$3. Indicate which part of the supply curve corresponds to the supply of each worker. 2. [25 points] Donald Duck has three nephews Huey, Dewey and Louie. Each of them has \$20 of pocket money, and they can only spend their money on ice cream. Ice cream comes in two flavors, strawberry and chocolate; strawberry ice cream costs \$1 per pint, while chocolate costs \$3 per pint. a) [5 pts] Huey is very particular and likes to consume twice as much strawberry ice cream as he does chocolate ice cream (in other words, he wants to consume 2 pints of strawberry ice cream for every pint of chocolate). Draw Huey’s budget constraint and two of his indifference curves: 0 |C1 that passes through the point of4 pints of each flavor o ICZ that passes through the point of 6 pints of strawberry and 3 pints of chocolate ice cream ls Huey happier with 4 pints of each flavor, or would he prefer 6 pints of strawberry and 3 pints of chocolate? Label all relevant points and intercepts. Hues is Mwer WM 6 yin-la ai- Sh’ﬁm)be’rg 01-“ fl 3 VAR of Cmmmtg ice. Carri/m clam “IL-u: COM/dam odd 0% lie: am A Mir-(kelp inatt‘ﬁ e (if/wee ccc Nd . Stxauiloe r (a ll G Lo b) [5 pts] Dewey likes all ice cream equally and does not care about the flavor of the ice cream. Draw Dewey’s budget constraint, his optimal consumption point and the indifference curve going through this point. (lnor 0m“ c) [3 pts] How much strawberry ice cream would Dewey consume if strawberry ice cream became more expensive and cost \$3 per pint? [khan F5 71:27 Md *6 ‘—‘ \$3 P ADP-”JP 13’s [5“ d : C! deYﬂ/ﬂ)‘ 1‘11: (M SW2 so 5 as his i‘MLir[[f'rm(r rural—f. Md x415 CW&quot; [WWW/w mwwkm 0m ~4M Malawi (mam/r7! , :0 617’s ﬁg pin/5 0;” 57W 2W?“ d) [4 pts Draw Dewey’s demand curve for strawberry ice cream. You can assume that the price of chocolate ice cream remains fixed at \$3 per pint. 5 F 1% Price elbow [3» ho fir/Lu/bfi‘iﬂ is clmrmdui- {it {mm below {65, [We] S’fYM'JNiii-f is ri'm;,-M4M. \ i t A! 12110 Nadia 4:5,I he [5 7“ dA' [{P mod ban/Nit K M&quot;; o/a~/( ”Wt&quot; grit/“Iberia in (rm/m, I K . , . 71‘} 7’0 JAM/be I lid '5 e) [5 pts] Louie likes both flavors of ice cream and would like to consume some of each. His preferences can be represented by the ”usual” smooth, bowed-in indifference curves. Prices are still pc=\$3 and p5=\$1. Suppose that you know that Louie consumes 10 pints of strawberry ice cream when he has \$20 in pocket money but would only consume 8 pints of strawberry if he had \$40. Depict this situation using the appropriate tools. What is the economic term for a good such as strawberry ice cream in this scenario? [when demrmd {in (I 300d deems welh cm incmrtge Iii income I +013 6004 15 (Lard am inferior 900d. Serb 6 kg f) [3 pts] Who gets the highest level of happiness from his pocket money: Huey, Dewey or Louie? lie is impossible {,0 merc .WS 0( ﬁaﬂyi’rmc ﬂat/95\$ dgﬂprcM {Amiri‘oimis‘w we almlt wow m‘ikw flueg‘ undead or Lovuc M m, [Mal/11d &amp;M o-( /£,4L{)pl/uf£. ...
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