PPF will be a perfectly straight line (constant opportunity costs)

AA = Switzerland CA for Chocolate = France CA for Cheese = Switzerland

By comparing the MU/P for A and the MU/P for B. One should first purchase the one with a HIGHER MU/P (Marginal Utility per dollar)

- 0.8 (inferior) (normal) +8.0 (‘more normal’)

+ 0.5 (substitutes) (compements)

Accounting Profits? YES ($80,000) Economic Profits? NO (-$20,000 … an econ. Loss) TVC = $470,000 (TC-TFC=TVC)

TR = P * Q Economic Profit = TR – TC

$800,000 $100,000

HEIGHT: Value of the tax or subsidy WIDTH: The change in quantity as a result of the tax/subsidy.

MB g4 = 2 cents. At P=5, George buys 2, Ringo buys 3. Total CS=25 cents [50-25] Q kkTB George TB Ringo

QTC $5, $5, Profit Max = 4 units

QTC $5, $15, $5, $15

Accounting profit of TR=$105,000 Normal TR=$130,000 Economic profit of TR=$180,000

No (P does not equal MC) Yes (P > ATC) No (because MC ≠ MR)

B D Cannot tell (it’s where MC=MR… no MR on graph)

At P 2 or P 1 At P, you would shut down in the short run, so you would earn a loss equal to your fixed costs.

Draw graph showing MSC > MPC OVERALLOCATE PER UNIT TAX

Non-Rival & Non-Excludable Ie. national defense, free public radio, free music downloads…etc.

QLQL Total Output (per day) $80 (same for each worker… MFC = Wage $40 [4 units * $10 each] 3 [4 th would cost 80, but only worth 70 (MRP)]

Ed = 20/100 = 0.2 = relatively inelastic [<1] Or using TR Test… Price increases (10 cents  20 cents)… TR increases ($10 million to $16 million)

Firm’s Demand Curve is horizontal… AKA - They can already sell as many as they want at the market price, so lowering price will lose them profits

Because, if you add a marginal that is BELOW the average… it pulls the average down. If you add a marginal that is ABOVE the average, it pulls the average up.

NO ANSWER – cannot solve, because there is no way to determine your total costs.

TR = $100,000

Draw graph showing MSB > MPB UNDERALLOCATE DWL will be the triangle pointing toward the right (toward Socially Optimal point)

Demand increases Because of the demand for factors are derived from the demand for the product (DERIVED DEMAND)

Ed = 0/x = 0 = perfectly inelastic (demand does not respond at all to price change)

Productive: NO Allocative: YES

4 Tacos & 3 Pizzas [TU = 80 utils] Q TacosTU TacosQ PizzaTU Pizza

Laws, such as the Sherman Antitrust Act, meant to promote/enforce competition in the industry.

QTC ($) Profits maximized at 4 units MC of 6 th unit = $90 AVC at 3 units = (110-20)/3 = $30 TFC = $20 (constant)

Draw Step graph. MB = additional benefit per unit. At P=5, David buys 3, Bill buys 3. Total CS=14 dollars. Q pzTB David TB Bill

Draw Step graph. MB = additional benefit per unit. At P=3, Lydia buys 4, Anna buys 3. Total CS=10 cents. Q ttTB Lydia TB Anna

QMC Profit Max. = 3 units [MC=MR] TC at 4 units = $20 AVC at 3 units = 14/3 = $4.67

QTC Profits maximized at 4 units MC of 3 rd unit = $7 ATC at 4 units = 36/4 = $9

QMC =$69 Profit is maximized at 3 units (profit of $6)

4 pencils, 3 pens [TU = 58 utils] Q PencilsTU PencilsQ PensTU Pens

3 Gasoline, 3 Milk [TU = 220 utils] Q Gasoline TU Gasoline Q MilkTU Milk

MC=MB !!!!!!!!!!!!!!!!!!!