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PAI 723
Solutions to Problem Set #7
Professor David Popp
Fall 2013
1. a) The marginal revenue product of labor is simply the marginal product of labor times the price:
MRPL = (50-L)xP
w
= 50P - PL
b) Demand for labor is simply the marginal reven

Name: _
Exam # 2
November 7, 2013
PAI 723
Professor David Popp
You have the entire class period (80 minutes) in which to take the exam. The questions are worth
a total of 100 points. The number of points for each question should serve as a guide to the am

p. 1 of 3
PAI 723
Solutions to Problem Set #4
Professor David Popp
Fall 2013
1. Begin with what we know. First, when there is 0 labor, total product must be equal to 0, which
we see from the average product (AP = TP/L). When there is 1 unit of labor, tota

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PAI 723
Solutions to Problem Set #3
Professor David Popp
Fall 2013
1. a) By looking at the graph, we can tell utility is not maximized because the indifference curve is not tangent
to the budget constraint. Algebraically, we can tell utility is

p. 1 of 5
PAI 723
Solutions to Problem Set #6
Professor David Popp
Fall 2013
1. a) Each farm has 200 acres, and each acre produces 100 pounds of frozen vegetables. Thus, each farm produces
20,000 pounds of frozen vegetables (=200 x 100). Frozen vegetables

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PAI 723
Solutions to Problem Set #5
Professor David Popp
Fall 2013
1. Our choice for each community should depend on which type of service provision treats the most people per
dollar spent. For this, we need to consider both the costs and the nu

p. 1 of 8
PAI 723
Solutions to Problem Set #2
Professor David Popp
Fall 2013
1. a) The formula for elasticity is:
%Q
%P
Recall that %Q = Q/Q and %P = P/P. Thus, the percentage change in quantity = -350/3000 = -0.11666,
and the percentage change in price i

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PAI 723
Solutions to Problem Set #1
Professor David Popp
Fall 2013
1. The purpose of this problem is to get you thinking about how demand and supply curves are affected by outside
influences, and to help you distinguish between shifts of a curve

Practice Problems
PAI723
Professor David Popp
Fall 2013
1. Using supply and demand diagrams, illustrate the effect on the equilibrium price and quantity sold of cars when:
a) the rates for auto insurance double
b) imports from Japan are banned
c) Lee Iaco

Practice Problem Solutions
PAI723
Professor David Popp
Fall 2013
1. Using supply and demand diagrams, illustrate the effect on the equilibrium price and quantity sold of cars when:
a) the rates for auto insurance double
b) imports from Japan are banned
c)

p. 1 of 3
Practice Problems
PAI 723
Professor David Popp
Fall 2013
1. You are the manager of Meals on Wheels, a non-profit organization that delivers prepared meals to elderly
citizens. Five new volunteers have joined your organization, and it is your job

p. 1 of 12
Solutions to Practice Problems for Exam #2
PAI 723
Professor David Popp
Fall 2013
1. You are the manager of Meals on Wheels, a non-profit organization that delivers prepared meals to elderly
citizens. Five new volunteers have joined your organi

Practice Problems for Exam 1
1. Suppose that, due to El Nino, hot, dry weather in Texas has led to the death of half of the cattle raised
in that state, leading to a shortage of beef. At the same time, suppose that the price of pork (a
substitute for beef

P. 1 of 12
Practice Problem Solutions for Exam 1
1. Suppose that, due to El Nino, hot, dry weather in Texas has led to the death of half of the cattle raised in that
state, leading to a shortage of beef. At the same time, suppose that the price of pork (a

Name: _
Exam # 1
October 3, 2013
PAI 723
Professor David Popp
You have the entire class period (80 minutes) in which to take the exam. The questions are worth
a total of 100 points. The number of points for each question should serve as a guide to the amo