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

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

4. 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)

5. - 0.8 (inferior) + 0.8 (normal) +8.0 (‘more normal’)

6. + 0.5 (substitutes) - 0.5 (compements)

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

8. TR = P * Q Economic Profit = TR – TC

9. $800,000 $100,000

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

11. MB g4 = 2 cents. At P=5, George buys 2, Ringo buys 3. Total CS=25 cents [50-25] Q kkTB George TB Ringo 000 12012 22520 32925 43127 53228

12. QTC 00 15 29 314 420 528 $5, $5, Profit Max = 4 units

13. QTC 05 115 220 330 445 565 $5, $15, $5, $15

14. Accounting profit of $5,000 @ TR=$105,000 Normal profit @ TR=$130,000 Economic profit of $50,000 @ TR=$180,000

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

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

18. 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.

19. Draw graph showing MSC > MPC OVERALLOCATE PER UNIT TAX

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

21. QLQL Total Output (per day) 020 135 255 365 472 576 677 $80 (same for each worker… MFC = Wage $40 [4 units * $10 each] 3 [4 th would cost 80, but only worth 70 (MRP)]

24. 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)

25. 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

27. 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.

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

29. TR = $100,000

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

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

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

35. Productive: NO Allocative: YES

36. 4 Tacos & 3 Pizzas [TU = 80 utils] Q TacosTU TacosQ PizzaTU Pizza 112120 221236 328348 432454 530555

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

38. QTC ($) 020 150 275 3110 4150 5210 6300 Profits maximized at 4 units MC of 6 th unit = $90 AVC at 3 units = (110-20)/3 = $30 TFC = $20 (constant)

39. 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 000 1912 21618 32123 42427 52530

40. 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 000 165 2119 31513 41815 52016

41. QMC 0-- 15 24 35 46 57 Profit Max. = 3 units [MC=MR] TC at 4 units = $20 AVC at 3 units = 14/3 = $4.67

42. QTC 010 116 221 328 436 550 Profits maximized at 4 units MC of 3 rd unit = $7 ATC at 4 units = 36/4 = $9

43. QMC 0-- 125 220 324 430 532 25+20+24=$69 Profit is maximized at 3 units (profit of $6)

44. 4 pencils, 3 pens [TU = 58 utils] Q PencilsTU PencilsQ PensTU Pens 18115 2 227 320335 423442 525545

45. 3 Gasoline, 3 Milk [TU = 220 utils] Q Gasoline TU Gasoline Q MilkTU Milk 160144 299284 31203100 41354112 51445120

46. MC=MB !!!!!!!!!!!!!!!!!!!