Micro Economics

Instructions

Complete the following questions in the form of short essays. Each question is worth 6 points. Be sure to cite your references when needed. Type all responses following each question on this assignment page and submit to the Dropbox.

1. Answer the following questions about opportunity costs:
2. Define opportunity costs.
3. If you receive a free ticket to a concert for your favorite music artist, what is your opportunity cost of attending the concert?

1. Suppose you own a printing/graphics business that provides professional printing and marketing services and web design to your customers. What might be an example of an opportunity cost that your business might experience?

2. Answer the following questions about a production possibilities curve:
3. Why does the production possibilities curve have a shape which bows outward?
4. Given the following example of a production possibilities curve for the two goods, why would you not choose point A?

1. Given the following example of a production possibilities curve for the two goods, why would you not choose point X?

Good Z

Good Y

Module 1: Written Homework Assignment Instructions

60 Points

2

3. Define both terms and explain the difference between microeconomics and macroeconomics. Is gross domestic product a microeconomic or macroeconomic question?

Is the price change of pizza a microeconomic or macroeconomic question?

4. Scans of internal organs using magnetic resonance imaging (MRI). These devices are often covered by subsidized health insurance programs such as Medicare. Consider the following table illustrating hypothetical quantities of individual MRI testing procedures demanded and supplied at various prices. Answer the following questions

(4 points)

Price Quantity

Demanded

Quantity

Supplied

$100 100,000 40,000

$300 90,000 60,000

$500 80,000 80,000

$700 70,000 100,000

$900 60,000 120,000

1. What is the equilibrium price and equilibrium quantity of MRI tests?
2. Suppose that the government establishes a health plan guaranteeing that all qualified

participants can purchase MRI tests at an effective price to the individual of $100 per test.

How many MRI tests are now demanded? Is the result in the market a surplus or shortage? How large is the surplus or shortage?

5. Paint and paintbrushes are complement goods. Describe what occurs in both markets when there is an increase in the price of paint. In your explanation, be sure and describe which one is a change in quantity demanded with movement along the demand curve and which one is a change in demand with a shift in the entire demand curve:

1. Explain what happens to the demand curve for paint when the price of paint increases.

1. Explain what happens to the demand curve for paintbrushes when the price of paint increases.

6. Briefly explain the three tax systems – proportional, progressive and regressive. As you explain each one, also compare the relationship between marginal tax rate and average tax rate as income rises for each one.

Module 1: Written Homework Assignment Instructions

60 Points

3

7. The next 2 parts to this question give changes that have occurred in the broiler chicken market.

For each change in a determinant given, draw in the change that would occur on the supply/demand graph for chicken that is provided. Be sure and review what causes the curve to shift and what causes a movement along the curve as well as what determinants affect supply and what affect demand. Once you have drawn in your change, write a short explanation for each question discussing what would be the new equilibrium price and quantity levels due to the change. In other words, has equilibrium price or quantity increased, decreased or stayed the same, etc. (To draw in changes on the graph in Microsoft Word, you will go to the Insert menu and select Shapes and then choose lines or arrows to draw in your shifts or show movement along the supply or demand curves.)

1. In the chicken market, assume there have been substantial technological advancements made in the production processes for producing chicken. At the same time, consumer income has decreased (assume chicken is a normal good).

1. Chicken and beef are substitute products. Assume the price of beef has increased considerably. What happens in the chicken market?

D

S

Q

P

D

S

Q

P

Chicken Market

Chicken Market

Module 1: Written Homework Assignment Instructions

60 Points

4

8. Find an article that identifies a change in supply or a change in demand. Use the article to fulfill the following instructions and questions:

1. a) Copy and paste the article into your homework assignment. Be sure and cite your reference for the article. Indicate the source, author, title, date, and page for the article you have chosen.

1. b) Write a short summary addressing the following items:
2. What shift occurred in either supply or demand and in which direction would the supply or demand have shifted.

1. What factor changed that caused the shift. Describe the changes in the factor that have occurred.

iii. Indicate evidence in the article of whether the market is an international, national, regional, or local market.

9. Read the article, The Price of Wine is Dropping Fast, provided at the following:

https://www.cnn.com/2020/02/16/business/grape-surplus-cheap-winetrnd/index.htmlAnswer the following three questions:

1. What factors led to an increase in the supply of wine?
2. What factors led to a decrease in demand for wine?
3. What will the industry need to do to restore the long-term equilibrium in this

market?

10.Explain what an externality is and then give an example. How can government correct a negative externality? How can government encourage a positive externality?