Microeconomics 201

| August 31, 2015

Assignments are below:

Production Possibilities Curve
After reading the chapters from the background materials page, please address the following questions in an essay form:
1. Define the production possibilities curve in your own words.
2. Could a nation’s production possibilities curve ever shift inward? What are TWO factors that may cause this to occur?
3. How can an economy achieve points that are outside the production possibilities curve?
Point on PPC Farm goods Factory goods
b 10 700
c 20 650
e 60 400
f 70 120
Use the following graph to address questions 4 and 5 below. Consider a production possibilities curve (PPC) for an economy that produces farm goods and factory goods. It can produce the combinations listed in the table. Notice if the economy produces more farm goods, it will give up factory goods resources.
4. If the economy wanted to move from point b to c, what would be the opportunity cost of increasing farm production by 10 tons? Your answer should be in terms of factory goods.
5. Compare the movement from b to c and from e to f. What do you notice about opportunity cost? Explain.
Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length 4-5 pages

Assignemnt 2:
Choosing a Firm
In this SLP assignment for this session, you will be asked to examine the decisions of a small business owner. Since microeconomics is the study of individual households, firms, and government, we will take a closer look at the operations of a franchise firm. You will choose ONE franchise to follow for the entire session. You may select ONE firm from a list available from Entrepreneur magazine:
http://www.entrepreneur.com/franchises/fastestgrowing/index.html
Important Rule: Your franchise must NOT be in the top 50. Your professor will verify that your firm is acceptable.
This is a ranking of the fastest growing 500 franchises in the United States. Please pick only ONE firm from here. You must reference this firm for all SLP assignments (Modules 1–5). Be sure the firm is interesting to you since you will analyze it for the entire session.
For this first assignment, let’s take a closer look at the firm of your choice in the context of what you are learning in this module. Write a 2- to 3-page paper on the following issues:
4. What firm did you pick? Why is it interesting to you?
5. What are some opportunity costs of starting your own franchise?
6. Think about the three fundamental questions in economics. Apply each question to your firm.
7. List the three factors of production and explain if and how they are used by your firm.
SLP Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length: 2–3 pages double-spaced and typed.
The following items will be assessed in particular:
6. Your ability to apply the basic concepts from this module to different issues in economics.
Some in-text references to the modular background readings (APA formatting not required).

Assignment 3:

Write a 4- to 5-page essay that addresses the following FOUR questions on the market for milk. (For this Case, keep it simple; don’t worry about different brands, etc.)
8. Explain what happens to price and quantity of milk when the following events occur (you do not need to analyze the event itself but rather determine the effect of the event on supply and demand of milk):
A scientific study shows that consumption of milk is beneficial for healthy bones.
There is an outbreak of mad cow disease.
The price of almond milk decreases.
In order to promote healthy families, a price ceiling on milk is implemented.
9. Suppose Johnny drinks 4 cups of milk every day no matter what the price. What kind of elasticity does it have?
10. Suppose that when the price of milk increases by 40%, the percentage change in quantity demanded by consumer is reduced by 10%. Calculate the elasticity.
11. Based on your answer to Question 3, What happens to total revenue when the price of milk is increased. Why?
Some helpful suggestions on completing the assignment:
For each event, you must specify how it effects either demand, quantity demanded, supply, or quantity supplied. It is also important to demonstrate how the change will affect the market demand or supply curve. Also, be sure to state any assumption you are making regarding the relationship of the event and milk.
Here is an example of the best way to answer question #1 above:
Event: Price of cereal decreases.
Assume that cereal is a complement for complement. If cereal is cheaper, then the consumer will increase quantity demanded of cereal. If consumers buy more cereal, then there will be an increased demand for milk because it is its complement. This event causes a shift of the demand curve to the right. The shift will cause price and quantity of milk to increase.
Here is also some helpful information on how to address the elasticity questions:
Inelastic goods (goods in which consumers are less responsive to changes in price):
e < |-1|
Elastic goods (goods in which consumers are more responsive to changes in price):
e > |-1|
In this course, we use the absolute value of elasticity. The price elasticity of demand is always calculated as a negative value due to the law of demand (inverse relationship between price and quantity).
Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Length: 4–5 pages double-spaced and typed.

Assignment 4:

In this SLP assignment, we will examine the supply and demand of the good or service that your firm produces. Write a 2- to 3-page essay on the following issues:
12. Consider what your firm produces. What are some things that would change the demand for your product? Discuss at least two factors.
13. What are some things that would affect changes in supply? Discuss at least two factors.
14. How can quantity demanded be changed?
15. What kind of demand (elastic or inelastic) does the product that your firm produces have? Explain.
SLP Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Please be sure to cite all sources within the text and a reference list at the end of the paper.
Length: 2–3 pages double-spaced and typed.
The following items will be assessed in particular:
7. Your ability to explain the difference between changes in demand and quantity demand using an example of your choice.
8. Some in-text references to the modular background readings (APA formatting not required).
The essay should address each element of the assignment. Remember to support your answers with solid references.

Assignment 5:

16. The following table gives short-run and long-run total costs for various levels of output for a perfectly competitive firm:
Output (Q) SRTC AVC TR
0 350
1 400
2 425
3 465
4 505
5 560
6 635
7 730
Note: AVC is Average Variable Cost
TR is Total Revenue
SRTC is Short Run Total Cost
SRTC = FC + VC (Total Cost = Fixed Cost + Variable Costs)
Please see background material for additional formulas.
9. Suppose the fixed cost (FC) of production is $350 and Price (P) is $55, complete the table above. (Cut and paste the table into a separate document).
10. Suppose you are producing 2 units of output (Q = 2), if you want to produce one extra unit of output (Q = 3), what would be the marginal cost? (Show your work.)
11. If the market price is given as $55, how much output will the perfectly competitive firm produce to maximize profits? (Show your work.)
12. Calculate the profit or loss. (Show your work.)
13. Should the firm always shut down in the short run when it experiences a loss? Explain.
Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Be sure to cite all sources within the text and provide a reference list at the end of the paper.
Format: double-spaced and typed.
The following items will be assessed in particular:
• Show all work for numerical problems.
• Your ability to understand costs and how firms make decisions.
Some in-text references to the modular background material

Assignment 6:

Profits and Your Franchise Firm
In this module, we have explored the costs of production which have a direct impact on the profit of your firm. Write a 2- to 3-page essay that addresses the following questions.
17. Give an example of indivisible inputs for your firm.
18. Discuss the characteristics of a perfectly competitive firm. Does your franchise firm share any of these same traits? Explain.
19. In the long run, what happens to economic profits (assuming your firm is competitive)? Explain.
SLP Assignment Expectations
Use concepts from the modular background readings as well as any good-quality resources you can find. Please be sure to cite all sources within the text and a reference list at the end of the paper.
Length: 2–3 pages double-spaced and typed.
The following items will be assessed in particular:
14. Your ability to examine inputs of a particular firm.
15. Your ability to understand a perfectly competitive firm.
16. Some in-text references to the modular background readings (APA formatting not required).

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