Scenario 1 Suppose that you have a choice between going to the mov...

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Scenario 1 Suppose that you have a choice between going to the movies with a friend for two hours or working at your job. If you go to the movies, you will spend $7 on a ticket and $5 on popcorn. If you choose to work, you will earn $10 an hour. 1. Refer to Scenario 1 What is your opportunity cost of going to the movies? Discuss. 2. Refer to Scenario 1 What is your opportunity cost of working? Discuss. 3. Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two- year graduate program? Figure 2 swenters 200 180 160 R 140 *S T 120 100 X 80 U 60 W 40 20 20 40 60 80 100 120 140 160 180 apples Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two. 4. Refer to Figure 2 The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is 5. Refer to Figure 2 Which point(s) on the graph is(are) efficient production possibilities? 6. Refer to Figure 2 Which point(s) on the graph is(are) unattainable given current resources and technology? 7. Refer to Figure 2 What is the opportunity cost of moving from point R to point Q? Table 2 Mobile Phones Pizzas 10,000 200 8,000 500 6,000 900 4,000 1400 2,000 2000 8. Refer to Table 2 Consider the production possibilities table for an economy that produces only mobile phones andpizzas. What is the opportunity cost of increasing production of mobile phones from 200 to 500? 9. Refer to Table 2 Consider the production possibilities table for an economy that produces only mobile phones and pizzas. What is the opportunity cost of increasing production of pizzas from 4,000 to 6,000? 10. Refer to Table 2 Consider the production possibilities table for an economy that produces only mobile phones and pizzas. Describe the shape of the production possibilities frontier. Figure 3 Mary's Production Possibilities Frontier Kate's Production Possibilities Frontier 10 cookies 10 cookies 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 1 2 3 4 5 6 muffins 1 2 3 4 5 6 muffins 11. Refer to Figure 3 What is Mary's opportunity cost of one muffin? 12. Refer to Figure 3 What is Mary's opportunity cost of one cookie? 13. Refer to Figure 3 What is Kate's opportunity cost of one muffin? 14. Refer to Figure 3 What is Kate's opportunity cost of one cookie? 15. Refer to Figure 3 Who has a comparative advantage in making cookies? 16. Refer to Figure 3 Who has a comparative advantage in making muffins? 17. Refer to Figure 3 If Mary and Kate trade foods with each other, who will trade away muffins in exchange for cookies? Discuss.Figure 4 Price S D Quantity 18. Refer to Figure 4. In this market for iPhones, the technology improves while all other factors remain constant. Which curve(s) shift(s) and in which direction? 19. Refer to Figure 4. In this market for iPhones, the technology improves while all other factors remain constant. Explain the change(s) in the equilibrium price and quantity. 20. Refer to Figure 4. In this market for tablet computers, more suppliers enter the market and the price of laptops, a substitute good, increases, while all other factors remain constant. Which curve(s) shift(s) and in which direction? 21. Refer to Figure 4. In this market for tablet computers, more suppliers enter the market and the price of laptops, a substitute good, increases, while all other factors remain constant. Explain the change(s) in the equilibrium price and quantity. Table 4 The following table shows the supply and demand schedules in a market. Quantity Quantity Demanded Supplied Price ($) (units) (units) 50 2 40 15 4 30 30 6 20 45 8 10 60 10 75 22. Refer to Table 4 What is the equilibrium price in this market? 23. Refer to Table 4 What is the equilibrium quantity in this market? 24. Refer to Table 4 At a price of $2, will there be a surplus or shortage of units in this market? 25. Refer to Table 4 At a price of $8, how large of a surplus will there be in this market? 26. Refer to Table 4 If the supply curve shifts to the right, will the price in this market rise or fall? 27. Suppose a freeze in Florida significantly reduces the supply of oranges this year. As a result, would you expect the total revenue from the sale of orange juice to rise or fall? Explain. Figure 5 Price 30 27 S 24 21 18 15 12 9 6 D 3 3 6 9 12 15 18 21 24 Quantity 28. Refer to Figure 5 If the government set a price ceiling at $9, would there be a shortage or surplus, and how large would be the shortage/surplus? 29. Refer to Figure 5 If the government set a price ceiling at $15, would there be a shortage or surplus, and how large would be the shortage/surplus? 30. Refer to Figure 5 If the government set a price floor at $15, would there be a shortage or surplus, and how large would be the shortage/surplus? 31. Refer to Figure 5 If the government set a price floor at $9, would there be a shortage or surplus, and how large would be the shortage/surplus? Scenario 2 The demand curve for restored historic buildings slopes downward and the supply curve for restored historic buildings slopes upward. The production of the 50th restored historic building entails the following: a private cost of $800,000; a private value of $650,000; a social value of $800,000. 32. Refer to Scenario 2. Is there an externality associated with this market? If your answer is "Yes," is the externality positive or negative? 33. Refer to Scenario 2. Is there an external cost associated with the restoration of the 50th historic building, or is there an external benefit? What is the amount of that external cost or external benefit?34. Refer to Scenario 2. Is the market equilibrium quantity of restored historic buildings less than, equal to, or greater than 50? 35. Refer to Scenario 2. Could the government impose a tax or provide a subsidy to move the market to the social optimum? If your answer is "Yes," should it be a tax or should it be a subsidy? Explain. 36. Assume each college degree that is granted conveys an external benefit of $3,500. The granting of the 500th college degree entails a private cost of $15,000 and a private value of $25,000. What is the social value of the 500th college degree? Discuss 37. Using the principle of the market forces of supply and demand, pick a product in the real world and discuss the price/quantity changes to that product from the consumer perspective. From the business perspective. (length about one side of one page max). Please type.

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1. Refer to Scenario 1 What is your opportunity cost of going to the movies? Discuss.
The opportunity cost of going to the movies is the earning foregone on the next best alternative which is working for $10 per hour. Thus the opportunity cost of going to the movie is the earning foregone for two hours $20.

2. Refer to Scenario 1 What is your opportunity cost of working? Discuss.
The opportunity cost of working is the enjoyment foregone by going to the movie with the friend which is the next best alternative. It could be even above $20 or below $20, as measurement of enjoying a movie is not given in the case (which would be the opportunity cost of working)

3. Melinda quits her job at a bank, which pays $30,000 a year, to enroll in a two-year graduate program. Her annual school expenses are $22,000 for tuition and fees and $2,000 for books. What is her opportunity cost of attending the two-year graduate program?
The opportunity cost of Melinda attending the two year graduate program is the earnings foregone at the bank which would give her $30000 per year for the two years she would be attending college and hence the opportunity cost is $30000*2 = $60000

4. Refer to Figure 2: The bowed outward shape of the production possibilities curve indicates that opportunity cost of apples in terms of sweaters is increasing for each and every unit of apple produced

5. Refer to Figure 2 Which point(s) on the graph is(are) efficient production possibilities?
R and U are efficient production possibilities as they lie on the PPF

6. Refer to Figure 2 Which point(s) on the graph is(are) unattainable given current resources and technology?
S and X are the unattainable points given...

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