Please look over my work with the questions on the homework sheet, they are all labeled. The first few pages are my work, last few pages are the questions

Gianna Gajdos Homework 1 This graph illustrates a tradeoff between the production of food (Ibs/month) and sunscreen (gallons/month). If Yucatan wants to produce 300 Ibs of food per month, his tradeoff is that he cannot produce any sunscreen due to a scarcity in resources. To use resources efficiently, Yucatan can produce 200 Ibs of food per month and 50 gallons of sunscreen per month. Any more of either and there would not be enough resources, any less and their resources would not be used to their capacity. 1b. 75 gallons of sunscreen per month 1. Opportunity cost of 1 pound of food = Sunscreen/Food = 150/300 = 0.5 gallons of sunscreen Opportunity cost of 1 gallon of sunscreen = Food/Sunscreen 300/150 = 2 pounds of food 2a. Marginal Benefit = change in quantity / change in willingness to pay = (75-25) / (3-2) = 50 2b. Allocative Efficiency = most effective way to distribute resources = 100 gallons of sunscreen and 100 Ibs of food per month 3a. Comparative Advantage 50/25 = 2 skis 25/50 = 0.5 SB Patty 10/20 = 0.5 skis 20/10=2 SB 3b. Both benefit from trade. If Tony were to make a snowboard himself, it would cost him 2 skis. If Patty were to make skis herself, it would cost her 2 snowboards. Therefore, by making the trade of 1 snowboard for 1 ski, they save themselves the extra time and resources needed to make the other product. Instead, it only costs them one of their products. 4a. Equilibrium at 65 cents per bag, 145 millions bag per week demanded and supplied Quantity Demanded (millions of bags per week and Quanatity Supplied (millions of bags per week) @ Quantity Demanded (millions of bags per week @ Quanatity Supplied (millions of bags per week) 200 150 100 50 50 60 70 80 90 100 Price (cents per bag) 4b. At 60 cents per bag there is a shortage of 10 million bags per week (150-140=10). Therefore, the price should increase by 5 cents per bag in order to achieve equilibrium. 5a. The demand curve increases, but the supply curve does not change. The new equilibrium is at 80 cents per bag, 160 million bags per week demanded and supplied. Quantity Demanded (millions of bags per week and Quanatity Supplied (millions of bags per week) @ Quantity Demanded (millions of bags per week @ Quanatity Supplied (millions of bags per week) 150 M 100 50 50 60 70 80 90 100 Price (cents per bag) 5b. The equilibrium of supply and demand increases by 15 million bags per week, with an increase in price of 20 cents per bag. 6. The supply curve shifts down, showing a decrease in supply. The new equilibrium is 85 cents per bag, 125 million bags per week demanded and supplied. Quantity Demanded (millions of bags per week and Quanatity Supplied (millions of bags per week) @ Quantity Demanded (millions of bags per week @ Quanatity Supplied (millions of bags per week) 200 150 100 50 50 60 70 80 90 100 Price (cents per bag) 7. The equilibrium price rises to 100 cents ($1) per bag and the equilibrium quantity demanded and supplied is 140 million bags per week. Quantity Demanded (millions of bags per week and Quanatity Supplied (millions of bags per week) @ Quantity Demanded (millions of bags per week @ Quanatity Supplied (millions of bags per week) 200 150 100 50 50 60 70 80 90 100 110 Price (cents per bag) 8a. The elasticity of demand for DVD rentals is 2 (|-2|) 8b. Elasticity of demand is 1 when price is $3 because that is when the proportionate change in quantity demanded and price are equal. 9a. Quantity Demanded (millions of Price (dollars per chip) chips per year) Total Revenue (QxP) 200 50 10000 250 45 11250 300 40 12500 350 35 13750 400 30 15000 When price falls from $400 to $350, the total revenue decreases by $1,250, from $15,000 to $13,750. When price falls from $350 to $300, the total revenue decreases by $1,250, from $13,750 to $12,500. 9b. At $350 dollars per chip, the total revenue is the highest at $12250 with a quantity of 35 million chips per year being demanded. 10. At $350 the demand for chips is unit elastic because it is at the maximized total revenue. 11a. Consumers are willing to pay a maximum of $2 per sandwich for the 200th sandwich. 11b. Producers are willing to receive a minimum price of $4 for the 200th sandwich. 11c. Total surplus is about $225.00 (work below) Is Demand is inelastic @ 200/ day 1 Consumer surplus Base: Q-Qnew= 150- (200124) = 141.67 Height : Price = $3 30- - CS : t . 3 . 141.47 = 212.50 XF 2 Producer Surplus Base : Qnew = 200/ 24 = 9.33 JD, Height: Price = $3 150 200 PS : 1 . 3. 8. 33 = 225.00 Total Surplus = CS + PS 212.50+ 225. 00= 225.00 12a. The equilibrium meal price is $6 and the equilibrium quantity is 2,500. 12b. If the price ceiling is $7 per meal, students will buy 2,250. 13. If the price ceiling is $4 per meal, the quantity bought is 1,500 (demand is 3,000, supply is 1,500, so there are only 1,500 available to buy). There is a shortage of 1,500 meals. Someone is willing to pay a maximum price of $4. 14a. If tulips are not taxed, at equilibrium, the price is $14/bunch. Demand and supply are 80 bunches/week. So, 80 bunches are bought each week. 14b. With tax, the price would rise to $20/bunch, adjusting the quantity demanded to 50 bunches/week and the supply to 140 bunches/week. The tax burden is split between the two because a buyer will have to pay more, but a seller will not be selling as high of a quantity. 15a. If there is no penalty on drugs, the equilibrium price is $60/unit and there are 400 units bought. 15b. If there is a penalty on sellers, the price will rise to $80/unit and demand will fall to 200 units/day and 600 units/day will be supplied. The new equilibrium will be about $70/unit with 400 units bought. 15c. If there is a penalty on buyers, the price will fall to $40/unit and demand will be 600 units/day but only 200 units/day will be supplied. The new equilibrium will be about $50/unit with 400 units bought.Homework-1 Principles of Microeconomics Econ 160 Instructor: Dr. Amarendra Sharma Maximum Score: 150 Instructions: Answer all questions. Type your answers using a word processor and save as a pdf file and then upload your answer file in the Brightspace before the deadline. Diagrams, if necessary, can be hand drawn and scanned and then inserted into the answer file at the appropriate space. Deadline: October 1, 2023 (11:59 pm) Use the table to work Problem 1. Suppose that Yucatan's production possibilities are given in the table. . Food Sunscreen 1. a. Draw a graph of Yucatan's PPF and explain how your (pounds per (gallons per graph illustrates a tradeoff. (5 points) month) month) 300 and 0 b. If Yucatan produces 150 pounds of food per month, how 200 and 50 much sunscreen must it produce if it achieves production 100 and 100 efficiency? (5 points) 0 and 150 c. What is Yucatan's opportunity cost of producing (i) 1 pound of food and (ii) 1 gallon of sunscreen? (5 points) 2. The table describes the preferences in Yucatan. Sunscreen Willingness to pay a. What is the marginal benefit from sunscreen and how is (gallons per (pounds of food it measured? (5 points) month) per gallon) b. Use the table in Problem 1. What does Yucatan produce 25 3 to achieve allocative efficiency? (5 points) 75 2 125 1 3. Tony's Production Possibilities Patty's Production Possibilities Snowboards Skis Snowboards Skis (units per (units per week) (units per week) (units per week) week) 25 and 0 20 and 0 20 and 10 10 and 5 15 and 20 0 and 10 10 and 30 5 And 40 0 And 50 3. Tony and Patty produce skis and snowboards. The tables above show their production possibilities. Tony produces 5 snowboards and 40 skis a week; Patty produces 10 snowboards and 5 skis a week. a. Who has a comparative advantage in producing (i) snowboards and (ii) skis? (5 points) b. If Tony and Patty specialize and trade 1 snowboard for 1 ski, what are the gains from trade? (5 points) 4. a. b. 5. a. b. 6. 7. 8. a. b. The demand and supply schedules for ' Quantity Quantity potato chips are in the table. Price demanded supplied Draw a graph of the potato chip market (cents per bag) (millions of bags a week) and mark in the equilibrium price and 30 160 130 quantity. (5 points) 28 }ig 14518 If the price is 60 a bag, is there a 30 130 160 shortage or a surplus, and how does the 90 120 170 price adjust? (5 points) 100 110 180 In Problem 4, a new dip increases the quantity of potato chips that people want to buy by 30 million bags per week at each price. Does the demand for chips change? Does the supply of chips change? Describe the change. (5 points) How do the equilibrium price and equilibrium quantity of chips change? (5 points) In Problem 4, if a virus destroys potato crops and the quantity of potato chips produced decreases by 40 million bags a week at each price, how does the supply of chips change? Explain. (7.5 points) If the virus in Problem 6 hits just as the new dip in Problem 5 comes onto the market, how do the equilibrium price and equilibrium quantity of chips change? Explain. (7.5 points) Figure shows the demand for DVD rentals. Calculate the elasticity of demand when the price of a DVD rental rises from $3 to $5. (5 points) FIGURE 4.2 At what price is the elasticity of demand for DVD Problem 11 rentals equal to 17 (5 points) Price (dollars per DVD) 0 25 50 75 100 125 150 DVDs per day Use the following table to work Problems 9 to 11. The demand schedule for computer chips is in the table. Price Quantity demanded 9. a. What happens to total revenue if the price falls from (dollars (millions of $400 to $350 a chip and from $350 to $300 a chip? per chip) chips per year) Cpoms) . 200 50 b. At what price is total revenue at a maximum? 750 45 (5 points) 300 40 10. At an average price of $350, is the demand for chips 350 35 elastic, inelastic, or unit elastic? Use the total revenue 400 30 test to answer this question. (5 points) 11. The table gives the demand and supply schedules for sandwiches. Quantity Quantity a. What is the maximum price that Price demanded supplied consumers are willing to pay for the (dollars per (sandwiches per hour) 200th sandwich? (5 points) sandwich) b. What is the minimum price that 0 300 0 producers are willing to accept for the 1 250 50 200th sandwich? (5 points) 2 200 100 c. If 200 sandwiches a day are available, 3 150 150 what is the total surplus or social 4 100 200 welfare? (5 points) 5 50 250 6 0 300 The table sets out the demand and supply schedules for college meals. 12. a. 'What are the equilibrium meal price and Ol;ralrcsep er dgiaalzl[(]gd g:;;]]?e[g equilibrium quantity of meals? (5 points) meal) (meals per week) b. If the college put a price ceiling on meals at $7 4 3.000 1,500 a meal, what is the price students pay for a 5 2.750 2.000 meal? How many meals do they buy? 6 2.500 2.500 (5 points) 7 2,250 3,000 13. If the college put a price ceiling on meals at $4 a 8 2,000 3,500 meal, what is the quantity bought, the shortage 9 1,750 4,000 10 1,500 4,500 of meals, and the maximum price that someone is willing to pay for the last meal available? (5 points) 14. The demand and supply schedules for tulips are in the table. Price Quantity Quantity a. If tulips are not taxed, what is the price and (dollars per ~ demanded supplied how many bunches are bought? (5 points) bunch) (bunches per week) b. If tulips are taxed $6 a bunch, what are the price 10 100 40 and quantity bought? Who pays the tax? 12 90 60 (5 points) 14 80 80 16 70 100 18 60 120 15. The table gives the demand and supply schedules for an illegal drug. Price Quantity Quantity a. What is the price and how many units are bought if (dollars per demanded supplied there is no penalty on drugs? (5 points) unit) (units per day) b. If the penalty on sellers is $20 a unit, what are the 50 500 300 price and quantity consumed? (5 points) 60 400 400 c. If the penalty on buyers is $20 a unit, what are the 70 300 500 price and quantity consumed? (5 points) 80 200 600 90 100 700