The maximum points total is 20 + 2 bonus points. The highest possible grade is 110%. You have 90 minutes to complete the exam. Budget your time well and show your work. Good luck! 1. (5 points) Hanna's Total Willingness to Pay Schedule for watches is $300 for 1 watch $300 for 2 watches $300 for 3 watches $300 for 4 watches $300 for 5 watches a) (3 points) If the price of a watch is $100, how many watches will Hanna buy? (Please remember to show your work!) b) (1 point) Draw Hanna's demand curve for watches. c) (1 point) If Hanna first gets one watch for free, how much money will she spend on purchasing additional watches? Continue to assume that the price of a watch is $100.
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The Ocean Pacific fleet has just decided to use a pole-and-line method of fishing instead of gill netting to catch tuna. The latter method involves the use of miles of nets strung out across the ocean and therefore entraps other sea creatures besides tuna (e.g. porpoises, sea turtles). Concern for endangered species was one reason for this decision, but perhaps more important was the fact that the major tuna canneries in the United States will no longer accept tuna caught by gill netting. Ocean Pacific decided to conduct a series of experiments to determine the amount of tuna that could be caught with different crew sizes. The results of these experiments follow.
| Number of Fishermen | Daily Tuna Catch (lb) |
| 0 | 0 |
| 1 | 50 |
| 2 | 110 |
| 3 | 300 |
| 4 | 450 |
| 5 | 590 |
| 6 | 665 |
| 7 | 700 |
| 8 | 725 |
| 9 | 710 |
At what point (what number of fishermen) does diminishing returns occur?
Refer to the previous question. Indicate the number of fishermen at the points that delineate the three stages of production. Enter your answers as whole numbers.
Refer to question 11. Suppose the market price of tuna is $3.50/pound. How many fishermen should the company use if the daily wage rate is $100?
Refer to question 11. a glut in the market for tuna causes the price to fall to $2.75/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100?
Refer to question 11. Suppose the price of tuna rises to $5.00/pound. At this new price, how many fishermen should the company now use if the daily wage rate remains at $100?
