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Introduction to
Economics
The Economic Problem
Opportunity Cost
Production Possibility Frontiers
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The Economic Problem
Unlimited Wants
Scarce Resources
Land, Labour,
Capital
Resource Use
ECN 487
Economic Growth
Department of Economics, Syracuse University
Fall 2016
Assignment 2
Submission Due Oct. 5 2016 In-Class
1. Consider an economy characterized by the following equations:
= 1
=
Where is the investment rate, A is a exogenous and co
1. Assume that an individuals preferences can be described by the following utility
function
[Chop-
u:u(m,m2) :am1+bx
where a and b are exogenous parameters. Let *9 denote the consumers income and let p1
and p2 denote the prices of goods 1 and 2, where 3;
For every question assume the normal shapes to demand and supply schedules unless instructed
otherwise. Also, assume there are no third party effects unless instructed otherwise.
1.
The U.S. imports tomatoes from Mexico. Neither production nor consumption
. Assume t : : 4. What is m(:c)?
Answer: 0
. Consider the function g : q(m) : 04 + 6m 7 37115 7 cm + ln(3m). Find
3%, leaving your answer in ve parts.
7 5 m
answer: dwjfmigmdmi lln3m) = U + 15 + LBW1 5 7 8m + % . Note
d(ln 3m) 1 d(ln m) d(ln am) d(ln a+
- -.-_ ._ -._-. in.
I. Suppose that a consumer, Kim, has $lQQQ to spend on two types of goods: Y
and X. Suppose also that the price of X is $20 per unit and the price of Y is
$10 per unit. The implied budget constraint is shown in the figure below as the
Instructions: Since a wrong answer has the same impact on your score as no answer, you
should answer every question. The total time is 65 minutes. The total score is 99 points.
GOOD LUCK!
l. A rational decision maker takes an action only if
a. the margina
Part 1: Multiple Choice. Circle the letter that corresponds to the best answer
5 points each.
1. Which of the following is not a function of money?
a. As a way to easily assess how much an item is worth.
As a common denominator that is always included in
Review questions Econ 4808
Set 1
revised February 15, 2007
1. Dene, in a few sentences, the concept of an economic theory.
2. Dene a thing or action in words. Refer to this thing as action as A.
Then dene a condition that is necessary but not sufcient for
1 a 1 r
Suuazzpam f;
[I a {71% m 5: Wlu MT 155% Wda 9k-Emfmmmé 120 fine maria
,"n w a . n i r
"4} 0.5} 1. 5/; F245, '5le
UT'EIFW {51/00: (,0 CatL} MM»M I SNIPS 61mm Mdrmé
(Wmt Vi {jib %§U [LE/1" wig
L0 Comb, 04f "(SM/womXA ;
tl «ft ; . A 5. VJvtllx: gar.
Multiple Choice
(Each question is worth 2.5 points. Please select THE BEST answer.)
1. When marginal cost is less than average total cost,
a. marginal cost must be falling.
b. average variable cost must be falling.
0. average total cost must be falling.
d
Questions 1-2
Jonathans utility function is U = 40P + 4013 0.5P2 0.SB2 , where P is his weekly consumption of pizza
and B is his weekly consumption of beer. His budget is $40. When the price of beer is $2 and the price of
pizza is $2, he chooses 10 units
One teaspoon of vanilla. Its an essential ingredient in hundreds of recipes, from cookies and cakes
to ice cream and cream soda. But a quick glance at the price tag on that bottle in any grocery store, and it
might seem that the rich and creamy liquid is
\Jnlul: pp
1) In the short run (or capacity)
of a firms plant is xed.
T F
2) Which of the following is not a barrier
to entry in the market?
a) patents b) Inefficiency
c) economies of scale
d) ownership of essential resources
3) Fixed costs can be control
The Quest for Profit and
The Invisible Hand
1
Adam Smith
Self-interest moves the economy
Consumers seek to maximize utility from
purchases
Firms seek to maximize profit from
production
It serves societys interest
It is due to profit opportunities
With it,