Problem Set 4
1. Sallys Sunflowers, Inc. uses fertilizer, labor, and land to produce sunflowers. When the
amount of land and labor is fixed, the relationship between the quantity of fertilizer and the
number of sunflowers grown per mo
MMSS 211-1 Practice Final Exam Questions
1. A monopoly is able to practice price discrimination. The MC of production is constant
at $10 per unit. The demand functions of the two types of consumers are:
A: Qd = 100 2P, MR = 50-Q
B: Qd = 110 P, MR = 110-2Q
Practice Exam 1 Questions, Part II
The following questions can be addressed by either Eric or Gaby the TA.
1. Suppose that the demand and supply of a given good are Qd = 60-5P and QS = -10 + 2P. A tax
in the amount of $2 is imposed on consumers
Practice Exam 1 Questions
1. A consumer buys food and clothing out of her income. When her income goes up by 25% and
the prices of food and clothing both go up by 50%,
A. the budget line shifts away from the origin and its slope is unchanged.
Last Problem Set!
1. Suppose that the market demand curve for a monopoly is given by Q = 100 5P.
A. What is the inverse market demand curve?
B. What is the average revenue curve for the monopoly?
C. What is the marginal revenue function that co
Practice Exam 2 Questions, Part I
1. A PC firm must sell its output at a market price of $2. Its present operating figures are: AC = $4
MC = $2,TFC = $1,750, Q = 1,000. To earn maximum profit this firm should
increase the output lev
Problem Set 5
1. A firms TR curve is given by TR = bQ 3Q2. Is this a perfectly competitive firm? Explain
why or why not.
2. If the SR MC and AVC curves of a competitive firm are given by MC = 2 + 4Q and
AVC = 2 + 2Q, how many units wi
Problem Set 3
1. Suppose that a consumers utility function is U(x,y) = ln x + ln y. Let P X = 2, PY = 1,
and I =10. Calculate the consumers optimal choice.
2. For Problem 1, derive the Income Consumption Curve (ICC). That is, determin
MMSS 211-1 Solutions Midterm 1E
Question 6. TB = 750 - note CS = TB TC -> TB = CS + TC (CS=consumer surplus,
TB=total benefit, TC=total cost)
Answer must feature two aspects: first, direction of the change in this situation, and second,
211-1 Notes for Week of 10-6-2014
1) says that the MU per dollar must be the same across goods.
If instead MUX /PX > MUY /PY, if I shift $1 away from the purchase of Y toward X, total utility
drops by MUY /PY due to less Y purchased but rises by MUX /PX
211-1 Week of 10-13-2014 Notes
Weve decomposed the total change in B (the total effect) into 1) the change in B due to the
relative price changethe sub effect and 2) the change in B due to the real income changethe
Sub Effect is always ne
TURBO MICROECONOMIC THEORY
Important: It is my assumption, as well as that of Northwestern University, that you will attend
every class and section mee
Problem Set 1
1. A) Suppose that the demand for milk increases because a new beauty treatment is
discovered that uses milk. Use diagrams to analyze the effects of this change on
the equilibrium for milk and the equilibrium for cookies
310-1 Week of 10-27-2014 Notes
Returns to Scale (a LR concept): All inputs increased by some factor, how does output respond?
IRTS (Increasing Returns to Scale): Output increases more proportionately than the inputs do. E.G.,
double inputs, output more
MMSS 211-1 10-20-2014 Notes
Short Run (SR) period in which the quantity of at least one productive resource (input) cannot
be varied by the firm.
In the Long Run (LR), the firm can vary all inputs completely.
Upcoming Plan: 1) SR Pdn, 2) LR Pdn, 3) SR C