Homework #1

Economics 102 – Microeconomics

Professor Schenk

Due: July 6, 2009

1. Find three blogs which discuss economics. Write the name of blog and the
web address.

2. Go to www.politicalcompass.org/test and fill out the form. Which quandrant

(square)

3. On Wednesday, June 29th the class met for the first time. What were your
alternatie options instead of attending class? Assume you were able to skip
class that night without incurring a penalty, what was your total opportunity
cost expressed in dollars?

4. Recent census estimates shows the median income for an individual with a
high school diploma is $21,079. Meanwhile, the tuition for a full-time Grand
View student is $18,234. (Reference:
http://www.census.gov/population/socdemo/education/cps2006/tab08-1r.xls)

a. What is the accounting cost of a high school graduate attending Grand

View for a year?
b. What is the opportunity cost of a high school graduate attending Grand
View for a year?

5. The median earnings for Bachelor degree recipients is $40,166. Students will
forgo some consumption early in life (e.g., car, clothing, nice housing) for
more consumption later in life. This concept is called intertemporal trade-off.
Below is a table showing consumption early in life and later in life:
Current Future
Consumption Consumption
100 800
260 750
340 650
380 600
400 550
a. Draw a production possibilities frontier with current consumption on
the x-axis.
b. What is the opportunity cost of moving from 100 units of current
consumption to 260 units? Simiarly, the opportunity cost of moving
from 260 units to 340 units?
 c. What is the slope of the production possibilities frontier when moving
from 100 units of current consumption to 260? When moving from 340
to 380?
d. Does the table exhibit increasing, constant, or decreasing marginal
opportunity cost?

6. Suppose there are two countries—United States and Uganda—and two types
of goods—textiles and c omputers. Below is the production schedule for each
country:
United States Uganda
Computers Textiles Computers Textiles
0 4,000 0 5,000
1 3,000 1 2,500
2 2,000 2 0
3 1,000 3 0
4 0 4 0
a. Draw the production possibilities frontier for both countries with
computers on the x-axis.
b. Draw the combined production possibilities frontier.
c. Which country, if any, has the comparative advantage for producing
computers? Why would that country have the comparative advantage?
d. Label the point where trade will occur. Mark it as point ‘T’.
e. Should countries engage in trade? Why or why not?

7. Again, consider two countries producing textiles and computers with the
following production schedule:
United States Canada
Computers Textiles Computers Textiles
0 4,000 0 2,000
1 3,000 1 1,000
2 2,000 2 0
3 1,000 3 0
4 0 4 0
a. Draw the production possibilities frontier for both countries with
computers on the x-axis.
b. Which country, if any, has the comparative advantage for producing
computers? Why does this response differ from 6b?
c. Should countries engage in trade? Why or why not?

8. Consider the following market supply and demand schedule:

Quantity Quantity
Price Demanded Supplied
10 100 20
20 75 50
 30 50 80
40 25 110
a. Draw the supply and demand curves with the y-axis labelled “price”
and x-axis labelled “quantity”.
b. What is the equilibrium price?
c. How many units will be sold at the equilibrium price?

You’re done!