Webster BUSN 5260 – Mid-term Examination

Webster BUSN 5260 – Mid-term Examination

Subject: General Questions    / General General Questions
Question

Webster University, NCR

Mid-term Examination

BUSN 5620 –S1, 2017

Instruction: Please type your answers.

Answer the following questions: Please show your work.

1. Problem No 07, Page 20

The table below describes the production possibilities confronting an economy. Using that information:

(a) Calculate the opportunity costs of building hospitals.

(b) Draw the production possibilities curve.

(c) Why can’t more of both outputs be produced?

(d) Which point on the curve is the most desired one?

Potential Output Combinations Homeless Shelters Hospitals

A 12 0

B 10 1

C 7 2

D 4 3

E 0 4

2. Problem No 03, Page 44

GDP per capita in the United States was approximately $55,000 in 2015. Use the growth formula to answer the following questions:

(a) What will it be in the year 2020 if GDP per capita grows each year by 0 percent?

(b) What will it be in the year 2020 if GDP per capita grows each year by 2 percent?

Growth formula: (future value) = (present value) × (1 + r)t

3. Problem No 08, Page 71

Assume the following data describe the gasoline market:

Price per gallon $2.00 2.25 2.50 2.75 3.00 3.25 3.50

Quantity demanded 36 35 34 33 32 31 30

Quantity supplied 24 26 28 30 32 34 36

(a) Graph the demand and supply curves.

(b) What is the equilibrium price?

(c) If supply at every price is reduced by 6 gallons, what will the new equilibrium price be?

(d) If the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described in part c.?

4. Problem No 12, Page 90

POLICY PERSPECTIVES

Suppose the following demand exists for iPhone apps:

Price $10 9 8 7 6 5 4 3

Quantity 2 3 4 5 6 7 8 9

demanded (millions)

(a) At $9, what quantity is demanded?

(b) If the price drops to $6, what quantity is demanded?

(c) Is demand elastic or inelastic in that price range?

(d) If advertising convinces people to demand 3 million more apps at every price, how many apps will be demanded at a price of $9?

(e) Graph the above answers, using point A for (a), point B for (b), and point C for (d).

Schiller, Bradley. Essentials of Economics (Page 90). McGraw-Hill Higher Education. Kindle Edition.

5. Problem No 04, Page 108

Suppose the mythical Tight Jeans Corporation leased a second sewing machine, giving it the following production function:

Number of workers: 0 1 2 3 4 5 6 7 8

Quantity of output: 0 10 36 56 68 74 76 76 74

(a) Graph the production function.

(b) On a separate graph, illustrate marginal physical product. At what level of employment does

(c) The law of diminishing returns become apparent?

(d) MPP hit zero?

(e) MPP become negative?

6. Problem No 08, Page 131

Consider the case of a T-shirt shop for which the following data apply: Rent = $200/day; Labor cost = $4/ shirt; and Output (sales) = 40 T-shirts/day. Using these data and the information contained in the News Wire “Competitive Pressure” compute:

(a) Total revenue per day.

(b) Average total cost.

(c) Per unit profit.

(d) Total profit per day.

7. Problem No 10, Page151

POLICY PERSPECTIVES

Assume the on-campus demand for soda is as follows:

Price 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.25

($per can)

Quantity demanded 30 40 50 60 70 80 90 100

(per day)

If the marginal cost of supplying a soda is 50 cents, what price will students end up paying in

(a) A perfectly competitive market?

(b) A monopolized market?

8. Why producers advertise for their product, explain using the Elasticity concept.Please provide economically sound quality answer.

9. If profit is the difference between Total Revenue and Total Cost, to maximize profit, Total Revenue must be maximized. True / False? Defend your answer and provide economically sound quality answer.