INSTRUCTIONS

Work is due in soft copy at the beginning of the class on the due date. You have to submit the assignment in the assignment section of Blackboard. You must perform this assignment in groups of 5-6 students. Type your answers in a Microsoft Word. Ensure that you complete all the parts to all questions and follow the organization suggested by each question. I recommend that you use Microsoft Excel to perform calculations and prepare data tables for presentation where applicable.

EVALUATION

Assignment 1 will be graded out of100 marksand is worth 10% of your course grade. Work not submitted at the beginning of the class on the due date will earn a grade of zero.

Question1- Chapter9(20marks)

1.Assume that Canada is an importer of televisions and that there are no trade restrictions. Canadian consumers buy 1 million televisions per year, of which 400 000 are produced domestically and 600 000 are imported. (20 marks)

a.Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by $100. Draw a graph to show how this change affects the welfare of Canadian consumers and Canadian producers and how it affects total surplus in Canada.

b. After the fall in price, consumers buy 1.2 million televisions, of which 200 000 are produced domestically and 1 million are imported. Calculate the change in consumer surplus, producer surplus, and total surplus from the price reduction.

c. If the government responded by putting a $100 tariff on imported televisions, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of Canadian welfare? Who might support the policy? Who might oppose it?

d. Suppose that the fall in price is attributable not to technological advance but to a $100 per television subsidy from the Japanese government to Japanese industry. How would this affect your analysis?

Question2 - Chapter10(20marks)

A.Using a demand and supply framework, explain why governments subsidize university education. (4 marks)

B. A local drama company proposes a new neighbourhood theatre in Vancouver. Before approving the building permit, the city planner completes a study of the theatre's impact on the surrounding community. (16 marks)

a. One finding of the study is that theatres attract traffic, which adversely affects the community. The city planner estimates that the cost to the community from the extra traffic is $5 per ticket. What kind of an externality is this? Why?

b. Graph the market for theatre tickets, labelling the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output, and the efficient level of output. Also show the per-unit amount of the externality.

c. On further review, the city planner uncovers a second externality. Rehearsals for the plays tend to run until late at night, with actors, stagehands, and other theatre members coming and going at various hours. The planner has found that the increased foot traffic improves the safety of the surrounding streets, an estimated benefit to the community of $2 per ticket. What kind of externality is this? Why?

d. On a new graph, illustrate the market for theatre tickets in the case of these two externalities. Again, label the demand curve, the social-value curve, the supply curve, the social-cost curve, the market equilibrium level of output, the efficient level of output, and the per-unit amount of both externalities.

e. Describe a government policy that would result in an efficient outcome.

Question3- Chapter11(10marks)

The X nation has 5 million residents, whose only activity is producing and consuming fish. They produce fish in two ways. Each person who works on a fish farm raises 2 fish per day. Each person who goes fishing in one of the nation's many lakes catches X fish per day. X depends on N, the number of residents (in millions) fishing in the lakes. In particular, if N million people fish in the lakes, each catches X = 6 - N fish. Each resident is attracted to the job that pays more fish, so in equilibrium the two jobs must offer equal pay. (20 marks)

a. Why do you suppose that X, the productivity of each fisherman, falls as N,the number of fishermen, rises? What economic term would you use to describe the fish in the country's lakes? Would the same description apply to the fish from the farms? Explain. (2 marks)

b.The country's Freedom Party thinks every individual should have the right to choose between fishing in the lakes and farming without government interference. Under its policy, how many of the residents would fish in the lakes and how many would work on fish farms? How many fish are produced? (2 marks)

c.The country's Efficiency Party thinks X should produce as many fish as it can. To achieve this goal, how many of the residents should fish in the lakes and how many should work on the farms? (Hint: Create a table that shows the number of fish producedon farms, from the lakes, and in totalfor each N from 0 to 5.) (6 marks)

Question4 - Chapter 13(50marks)

1.Complete the following table.

Total Product

Fixed Cost

Variable Cost

Total Cost

Average Total Cost

Average Fixed Cost

Average Variable Cost

Marginal

Cost

0

100

0

1

100

90

2

100

170

3

100

240

4

100

300

5

100

360

6

100

450

7

100

540

8

100

650

9

100

780

10

100

930