Economics 1011 Section 12 Fall, 2022 Quiz Preparation
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Economics 1011 Section 12
Fall, 2022
Homework for Class 11, Oct 4: Quiz Preparation
1a. Frost’s Frozen Treats, Inc, can produce two products, ice cream, I, and custard, C. Both are produced using cream and assume that Frosty has machinery that can only handle 100 gallons of cream per day. Assume that it takes 0.5 gallons of cream to make a gallon of ice cream (I) and 0.8 gallons of cream per gallon of custard. This implies that the equation of Frosty’s PPF written with C as the dependent variable is C = ___________________ and the opportunity cost of a gallon of ice cream is ______________.
1b. Assume Polar Products also produces I and C and can process 400 gallons of cream per day. But at Polar Products it takes 1.5 gallons of cream to make a gallon of ice cream and 2 gallons of cream per gallon of custard. This implies that the equation of Polar’s PPF written with C as the dependent variable is C = ___________________ and the opportunity cost of a gallon of ice cream is ______________.
1c. ___________________ has the lower opportunity cost of a gallon if ice cream.
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3. Mary eats apples, A, and bananas, B. Her own price elasticities of demand for apples = −0.7 and for bananas = −2.0. Her cross elasticity of demand between apples and the price of bananas is −0.5, and her income elasticities of demand for apples = 0.8 and for bananas = 1.5. If the price of bananas falls by 10%, you predict that Mary’s banana consumption will change by ______%, her expenditure on bananas will change by _________%, and her consumption of apples will change by __________%. If Mary’s income rises 40% her consumption of apples will change by ________% and her total expenditure on apples will change by __________%.
4. Francesca shops at Tracy’s and purchases 12 sheets for $8 each and 4 blankets for $24 each. At the same time, Anqi shops at Jacks and purchases 8 blankets for $24 each and 4 sheets for $12 each. If Francesca and Anqi happen to meet in Monroe Hall, what, if any, exchange might they consider? Show your work below.
5a. Assume that the market for burgers in McDonaldville is perfectly competitive. The market supply curve is SH = 200 PH, where SH is burgers supplied per day and PH is burger price in dollars per burger. Demand in McDonaldville is DH = 1,200 – 100PH where demand is in burgers per day. Market equilibrium price of burgers in McDonaldville should = ___________ and ____________burgers per week will be sold. Consumer’s surplus of burger feeders in McDonaldville will be $_____________ per day.
5b. There is sudden concern that cattle cause pollution and that consumers need to eat less beef. Accordingly a specific tax of $1.50 per burger is implemented. Market equilibrium price of burgers in McDonaldville should = ___________and ____________burgers per week will be sold. Total tax revenue will be $___________ per day. Consumer’s surplus of burger feeders in McDonaldville will be $_____________ per day. The total deadweight loss from this tax is approximately $____________________per day.
2022-10-06