BUSN 5260
Current Economic Analysis
Week 4: Personal
Assignment
There are no Internet questions with this assignment. You will have to include
graphs with this assignment. Remember graphs must be integrated into your Word
or Excel file course page submission, or sent as a PDF. If you have questions,
remember to post them to the General Questions area of the Discussion forum.
Problems
Problem 1
The following is a demand schedule for shoes:
Price:
$100 $80 $60
$40 $20
Quantity: 10 14
18 22 26
-A-
Illustrate the demand curve.
-B-
How much will consumers spend on shoes at a price of $80?
-C-
As price drops from $100 to $80, is the demand elastic or inelastic? Show your
work or reasoning.
Problem 2
Advertisers convince people that to be stylish they need twice as many shoes.
-A-
Redraw the demand curve.
-B-
How much will consumers now spend on shoes at a price of $80?
-C-
As price drops from $100 to $80, how does elasticity change as opposed to
problem 1? Why?
Problem 3
Refer to Table 4.1 in the textbook. How large of a tax-induced price
increase would it take to reduce cigarette consumption by 20 percent? Show your
work.
Problem 4
Identify three goods each for which your demand is (a) elastic and (b)
inelastic. What accounts for the difference of elasticity? Explain thoroughly.
Problem 5
Complete the following table. What is the
value of fixed cost?
|
Rate of Output |
Total Cost |
Marginal Cost |
Average Cost |
|
0 |
$100 |
||
|
1 |
$110 |
||
|
2 |
$130 |
||
|
3 |
$165 |
||
|
4 |
$220 |
||
|
5 |
$300 |
Problem 6
On a graph, depict marginal cost and average total cost using the data from
problem 5. Indicate minimum average total cost on the graph.
Problem 7
Suppose a company incurs the following costs:
Labor $400
Equipment $300
Materials $100
It owns the building so it doesn’t have to pay the $800 in
rent.
-A-
What is the total accounting cost?
-B-
What is the total economic cost?
-C-
Explain why these are different in this way.
Problem 8
Consider the marginal cost for a product like Microsoft Windows 8. How does the
marginal cost for a product like this differ from a product like automobiles?
What relevance might there be to this difference?
