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22-09-2018

Product Code:-Microeconomics-PH111

PROBLEM 1 (QUESTIONS 1 TO 4)
Paul quit his public servant employment to start a convenience store (C-store).
• Paul

•  earned \$50,000 annually as a public servant.
•  rented the retail space which he owned while a public servant for \$24,000 annually
•  set up the C-Store in the retail space which he owned.

In the first year of operating the C-Store, Paul
• paid himself a salary of \$40,000.
• had other expenses totalling \$25,000.

Q1. Paul’s accounting cost in the first year of operating the C-Store was
a) \$50,000; b) \$40,000; c) \$25,000; d) \$65,000.

Q2. Paul’s explicit economic cost in the first year of operating the C-Store was
a) \$50,000; b) \$40,000; c) \$25,000; d) \$65,000.

Q3. Paul’s implicit economic cost in the first year of operating the C-Store was
a) \$24,000; b) \$34,000; c) \$40,000; d) None of these answers.

Q4. Paul’s total economic cost in the first year of operating the C-Store was
a) \$24,000; b) \$50,000; c) \$64,000; d) \$98,000; e) None of these answers.

PROBLEM 2 (QUESTIONS 5 TO 9)
ABC Company’s various short-run costs of producing up to 6 widgets are shown in the following Table.
ABC Company’s Cost of Producing Widgets

 OUTPUT TC TVC TFC AC MC AVC 0 30 A=? 1 50 2 180 B=? 3 C=? 60 4 D=? 85 5 E=? 110

TC = Total cost; TVC = Total variable cost; TFC = Total fixed cost;
AC = Average total cost; MC = Marginal cost; AVC = Average variable cost
Pink Assignment ECO 1104A Introduction to microeconomics
Summer 2018 Page 3 of 6

Q5. The dollar amount of cell A is
a) 50; b) 80; c) 100; d) None of these answers.

Q6. The dollar amount of cell B is
a) 90; b) 100; c) 150; d) 180.

Q7. The dollar amount of cell C is
a) 30; b) 50; c) 70; d) 80.

Q8. The dollar amount of cell D is
a) 260; b) 280; c) 300; d) 310

Q9. The dollar amount of cell E is
a) 450; b) 500; c) 550; d) 660

PROBLEM 3 (QUESTIONS 10 TO 14)
The Soot Free Company operates in a purely competitive chimney cleaning industry in Ottawa. Its short run costs are:
• Total cost = 40+10Q+0.10Q2 (Q = the number of chimneys cleaned per day);
• Marginal cost = 10+0.2Q

Q10. If the Soot Free Company charges \$20 to clean a chimney, how many chimneys (Q) must it clean every day to maximize its profit?
a) 10; b) 20; c) 40; d) 50.

Q11. What is the dollar average cost of cleaning a chimney cleaned based on your answer to question 10?
a) 5.50; b) 12.40; c) 15.80 d) 17.80.

Q12. What is the daily dollar fixed cost of cleaning chimneys?
a) 20; b) 25; c) 30; d) 40.

Q13. What is the daily total revenue based on your answer to question 10?
a) \$500; b) \$670; c) \$1000; d) \$1200.

Q14. What are Soot Free Company’s profit based on your answer to question 10?
a) \$90; b) \$210; c) \$790; d) 1000.

Pink Assignment ECO 1104A Introduction to microeconomics
Summer 2018 Page 4 of 6

PROBLEM 4 (QUESTIONS 15 TO 22)
Table 1 -- Specialisation and trade

 Hours required to harvest one bushel of: Bushels of wheat or corn harvested in a 40-hour week
 Column 1 Wheat (W) Column 2 Corn (C) Column 3 Wheat (W) Column 4 Corn (C) Alpha 6 8 8 6 Beta 48 24 1 2

Q15. Who has an absolute advantage in harvesting wheat from columns 1 and 2 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q16. Who has an absolute advantage in harvesting corn from columns 1 and 2 of the Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q17. Who has an absolute advantage in harvesting wheat from columns 3 and 4 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.
Q18. Who has an absolute advantage in harvesting corn from columns 3 and 4 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q19. Who has a comparative advantage in harvesting wheat from columns 1 and 2 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q20. Who has a comparative advantage in harvesting corn from columns 1 and 2 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q21. Who has a comparative advantage in harvesting wheat from columns 3 and 4 of Table 1?
a) Alpha; b) Beta; c) Neither Alpha nor Beta; d) Both Alpha and Beta.

Q22. What are the limits to trade in bushels of corn?
a) 0.5W ≤ 1C ≥ 1.33W; b) 0.7W ≤ 1C ≥ 1.4W; c) 2W ≤ 1C ≥ 6W; d) a) 0.5W ≤ 1C ≤ 1.33W.
Pink Assignment ECO 1104A Introduction to microeconomics
Summer 2018 Page 5 of 6

PROBLEM 5 (QUESTIONS 23 TO 30)
A non-discriminating monopolist faces a market demand given by P = 100 -2Q for its product. This translates as
• Total revenues (TR) = Price x Quantity = Q(100-2Q) = 100Q-2Q2
• Marginal revenue (MR) = 100 – 4Q
• Total cost = 20Q
• Marginal cost = 20

Q23. What is the non-discriminating monopolist’s profit-maximising quantity?
a) 10; b) 15; c) 20; d) None of these answers.

Q24. What is the non-discriminating monopolist’s profit-maximising price?
a) \$20; b) \$40; c) \$60; d) \$100.

Q25. What is the non-discriminating monopolist’s maximising profit?
a) \$800; b) \$1,200; c) \$2,000; d) \$2,200.

Q26. What is consumer surplus at the non-discriminating monopolist’s maximising price and quantity?
a) \$400; b) \$800; c) \$1,000; d) \$1,200.

Q27. What is producer surplus at the non-discriminating monopolist’s profit-maximising price and quantity?
a) \$400; b) \$800; c) \$1,000; d) \$1,200.

Q28. What would consumer surplus be in a perfectly competitive market?
a) \$1,000; b) \$1,600; c) \$2,200; d) \$3,200.

Q29. What would producer surplus be in a perfectly competitive market?
a) \$0; b) \$40; c) \$400; d) \$550.

Q30. By how much does total surplus in a perfectly competitive market exceed total surplus in a non-discriminating monopoly?
a) \$500; b) \$600; c) \$800; d) \$1,200.

Pink Assignment ECO 1104A Introduction to microeconomics
Summer 2018 Page 6 of 6

PROBLEM 6 (QUESTIONS 31 TO 32)
31. In a non-discriminating monopoly situation, deadweight loss is given by area
a) BCD; b) ABC; c) PBPB; d) ; d) PAACPC

32. In a perfectly discriminating monopoly situation, consumer surplus is given by
area
a) PBPX; b) PAACPC; c) PBPB; d) None of these answers.
o-o-o

Pink Assignment 1. D 2. D 3. B 4. E 5. A 6. B 7. D 8. D

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