Exercise 1 THE GOODS MARKET
(All units are millions of US dollars)
C = 500 +(0.5)YD
I = 100
T = 80
G = 200
1. Solve for the good market equilibrium. (Find equilibrium Y, Z, C, and YD.)
Total demand:
Good market equilibrium:
So,
Remember,
Z=C+I+G
Y=Z
Y=C+I
ECON 110
PROBLEM SET 6
EXERCISE 1:
Consider the following duopoly. Demand is given by P = 10 Q, where Q = Q1 + Q2.
The firms cost functions are C1 = 4 + 2Q1 and C2 = 3 + 3Q2 respectively.
a)
What are marginal costs for firm 1 and firm 2? What is marginal
Economics 110
Tanya Rosenblat
Fall 2004
Exam II
Suggested Solutions
1
Multiple-choice Questions (45 points - 3 points each)
Instructions: Select the best and/or the most complete choice among the ve oered by circling
the corresponding letter.
1. Suppose t
Prof. Rosenblat
Economics 110 - Problem Set 3 Solutions
Fall 2004
14.01 Fall 2000 - Problem Set 4
1. True/False/Uncertain
(4 points) a) When capital is xed, the average cost curve always has to be below the marginal
cost curve.
False: The average cost cur
Economics 110
Tanya Rosenblat
Fall 2004
Midterm I
Suggested Solutions
1
Multiple-choice Questions (40 points)
Instructions: Select the best and/or the most complete choice among the ve oered by circling
the corresponding letter.
1. The opportunity cost of
Understanding economic data
I: NATIONAL ACCOUNTS
(a)
Below is a summary of the revenue, expenses and profits for each of the three
firms:
Revenue
Nomar
Manny
Pedro
(b)
120
300
500
Expenses
Raw
materials
120
300
Wages
70
80
70
Taxes
40
Profit
TOTAL
70
200
ROSENBLAT
ECONOMICS 110
FALL 2004
ECONOMICS 110
PROBLEM SET 2
Solutions
1. If you think of buying clothes now and buying them in the future as two different
[substitute] goods, then a temporary drop in the price of clothes means that we have
changed the p
Economics 110
Tanya Rosenblat
Fall 2004
Problem Set 8
Solutions
1
Quantity Theory
1. Suppose the velocity of circulation of money decreases by 10%, the money supply rises by 20%, and
the price level increases by 15%. By how much has the real output change
ECON 110 PROBLEM SET 5
Solutions
1. a) The demand curve is Q = 11 P, MR = 11 2Q has twice the slope, and both
AC and MC are constant (i.e. flat) at $6. Setting MR = MC gives P = $8.50 and Q = 2.5,
or 2500 doses of the vaccine. Profits are [$8.50*2500] [$6
Prof. Rosenblat
Economics 110
Problem Set 4 - Suggested Solutions
Economics 14.01
Problem Set 5
Due October 25th 2002
October 25, 2002
1
1.1
Section 1 - True/False
Question 1:
(5 points): In the long run, entry and competition ensure that rms make zero
pr
Practice Problems for Exam 2 - Costs and Profits
14.01 Fall 2001 - Problem Set 4
Solutions
1. Briey explain why each of the following statements is True/False/Uncertain.
(3 points) a) In a rm that operates eciently none of the marginal products of its inp
Prof. Rosenblat
Econ 110 Growth Theory Practice Problems
Fall 2004
Problem 1.
Consider a standard Solow model without technological progress. In steady state total
output grows at rate q. Population grows at rate n.
(a) What is the growth rate of output p
Practice Problems - Suggested Solutions
1.
a. The adverse publicity concerning baseball games caused the demand curve D to shift
backward and downward to D. At the new equilibrium, the price of tickets fell from P to
P, as shown in the price-quantity diag
Exercise 1
Suppose you can produce one guitar with 120 hours of labor or a bookcase
with 30 hours of labor. You are on your PPF with a stock of 10 guitars and 30
bookcases.
(a) How many units of labor do you have?
From PPF, we can get the total number of
Economics 110
Game Theory Practice Problems
Fall 2004
I. Find all pure strategy Nash equilibria of the following games:
1.
Player 2
A
C
A
2,3
0,0
0,0
B
0,0
3,4
0,0
C
Player 1
B
0,0
0,0
6,5
(A,A), (B,B) and (C,C)
2.
Player 2
A
C
D
A
Player 1
B
200,6
3,5
4,
(d) The quantity equation says that MV = PY . Here, M and V do not change,
so the old value PY = 1 4374 has to equal the new value Pn 3713. This is
true for Pn = 1.18. We already found that the real wage changes to w = 15, so
the nominal wage must be high
National Accounts
In Orangeland, a closed economy, Orangelanders live only on orange juice. There is a
farm that produces oranges and a factory that produces OJ. In 2003, the orange farm
produced 10 oranges, and sold them to the orange juice company at $1
Ms
i
.5
.25
B
A
.15
Md
2.5
3.5
5
M
(in trillions)
Md = 10(.5-i)
Ms=3.5
2. What is the equilibrium rate of interest?
Md = Ms
10(.5-i)=3.5
i=.15=15%
3. Label the equilibrium of the money market at point A on the graph from number 1.
4. Now, the central bank
Econ 110 - Practice Problems - Solutions
(Diagrams not even close to scale.)
Question 1.
a. Since K is fixed at 4 units, each firm must use L = q2/16 units of labour to produce q units of output.
The short run total cost function is SRTC = wL + rK = 16(q2