Please answer the problem set I upload below. This is a microeconomics question.admin
Economics 103 Professor Friedman Spring 2016 Your Name(s):__________________________________________ Your…
Please answer the problem set I upload below. This is a microeconomics question.
Your Section Time and Day:_____________________________
Problem Set 1
Due Date: February 22
Hand in hard copy to your TA’s mailbox, 8
floor of Thompson Hall by 4PM
Do not submit answers on line through Moodle or through the Cloud
Note that there are two types of problems.
You are encouraged to work with someone else in
your TA section on the quantitative problems (2, 3); hand in one set of answers to these problems
with both your names
Do the essay questions individually (1, 4, 5, 6) and append separate
answers with each person’s name for these along with your group answers to the quantitative
Type your answers; staple pages together.
Total 20 points.
Warmup (3 points): For each of the following terms, define, give an example, and, for
terms marked with an asterix (*) draw the appropriate graph.
Production Possibility Frontier*
Tradeoff* and Opportunity Cost
Gross Domestic Product and Per-capita Income
(5 points) Production Possibility Frontiers: roses or pot
(1 point) Draw a production possibilities curve for your farm of ten acres between
growing pot and growing roses.
Is there a tradeoff between these two?
How is the tradeoff shown in your graph? (Make sure you label you axes.)
(1 point) Is the PPF line meaningful?
Can your farm produce outside (above) the
Why or why not?
Will you produce inside the line?
Why or why not?
(1 point) What is the cost of growing pot?
What is the cost of growing roses?
Where are these costs shown in your graph?
(1 point) What happens to the production possibilities frontier if you have a good
compost pile and can fertilize your land? What happens to the PPF if you get a
new pest-control system that makes it easier to grow roses (but has no effect on
What if the DEA starts spraying to kill pot plants in a way that does not hurt
What if they there is a swarm of insects who love to eat marijuana where
the crop can only be saved by cleaning the plants by hand, a laborious process?
(1 point) What happens if you discover an Old Indian Trick (OIT) where you can
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grow roses and marijuana together so that the pot keeps out other weeds and helps
the roses grow while the roses shade the pot protecting it from the sun (and the
Show the new PPF.
Does this mean that we can have
(4 points) Capitalism
(1 point) Independent farmers in Kenya would grow coffee which they would
roast and consume as a much-needed beverage. Show the circuit of production for
this way of getting something to drink with breakfast. How is this circuit changed
if the farmers exchange some for what they produce for Coca Cola?
circuit of production if farmers sell some produce for money which they use to
Is there a tendency for farmers like this to increase their production?
(1 point) British authorities wanted Africans to produce more coffee for British
coffee companies who hire British workers to roast the coffee for sale in cafes
throughout the world.
They imposed taxes that had to be paid in currency.
how this changed the circuit of production for Kenyan farmers and the market for
(1 point) British coffee companies used profits from selling Kenyan-grown coffee
to buy opium in India to sell in China in exchange for Chinese silk for sale in
Britain for money that they use to buy more Kenyan coffee and to hire workers to
roast the coffee.
Show the circuit of production for the British coffee companies.
(1 point) Indian opium is addictive and the Chinese authorities ban its sale.
happens to the market for Kenyan coffee and for British labor?
If the British
persuade the Chinese to allow the sale of addictive opium, use the circuit of
production to show the effect on the markets for opium, silk, coffee, and British
(2 points)What makes a social science explanation different from methodological
How would social scientists explain why American men wear short hair,
while women wear their hair long?
How would a methodological individualist explain
(3 points) Read Chris Tilly, “Shaking the Invisible Hand” (
Real World Micro
, article 1.2).
What is the “Invisible Hand” theory?
What are the political implications?
List some of
the assumptions made by economists who believe in the “invisible hand” and oppose
Why do economists make assumptions like these?
these assumptions do you find credible, which do you think are not valid?
assumptions do you think matter in the sense that if they are not valid then people should
reconsider the theory?
(3 points) Externalities. A neighbor has rented his house to students who like to party late
into the night.
I like to get to go to sleep early to make it to my 8AM classes.
(1 point) What are the conditions of an
resolution to this dispute?
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