08 Quiz 1 - Name Section Time Elements of Microeconomics...

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Name _________________________________ Section Time _________ Elements of Microeconomics Quiz 1 Estonia, Latvia, and Lithuania (the Baltic countries) can each produce either computer software or amber jewelry. Estonia can produce 10 software programs or 20 pieces of jewelry in a week; Latvia can produce 10 software programs or 80 pieces of jewelry; and Lithuania can produce 10 software programs or 50 pieces of jewelry. The price of a software program is \$1000 while the price of a piece of jewelry is \$200. 1a. Draw the PPC for each individual country. 1b. Draw the PPC for the Baltic economy (the group of 3 countries). 1c. How much amber jewelry and how much software will the Baltic economy produce? Show (graphically or mathematically) how you found this answer. Explain briefly why your answer is right. 1d. Leaving the price of amber jewelry constant, derive the supply curve for software.

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1e. What happens to the Baltic PPC if a new computer language is written that doubles productivity of writing software in all 3 countries (that is, the new language means that each

Unformatted text preview: country can write twice as many programs each month)? What happens to the supply curve? 2. When studying for an economics quiz, Sandra likes to eat exactly two peanut butter cookies with every can of root beer that she drinks. She has a budget of \$10 to buy snacks during study sessions. Cookies cost \$1.50 each and a can of root beer costs \$2. 2a. Draw 2 of Sandra’s indifference curves, carefully labeling the graph. 2b. Drawn Sandra’s budget constraint for studying refreshments on the same graph. 2c. How many cookies and cans of root beer does Sandra buy? Explain how you arrived at this answer and show it on the graph above. (If you can’t find the mathematical answer, show graphically how you would find it.) 1d. Now suppose Sandra does not insist on a fixed number of cookies per can of root beer, but has more “typical” preferences. Can Sandra’s indifference curves ever cross? Explain why or why not....
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• Summer '11
• BrianPhelan
• Microeconomics, Computer program, Baltic Sea, Estonia, Latvia, Baltic states, Sandra buy

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