MGEA02H3 Study Guide - Final Guide: Demand Curve, Form 10-Q

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magentagerbil794

4 Aug 2013

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

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all

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MGEA02H3 Full Course Notes

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You must hand in this answer booklet at the end of the. Do not remove the staple when completing your. Write your name and student number in the. Name____________________________________________________________________ last name (underline your last name) first name. Complete the answers in the appropriate place in this booklet and hand in the booklet at the end of the exam. You are required to draw graphs/diagrams in this booklet. Make sure you label all diagrams/graphs as fully as possible. In morocco, the production of 1 unit of food (f) requires 1/4 of a unit of labour and the production of 1 unit of shelter (s) requires. Canada has 60 units of labour and morocco has 60 units of labour. In the absence of trade, canada produces and consumes 135 units of food and 300 units of shelter, and. Morocco produces and consumes 80 units of food and 80 units of shelter.

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42. In Canada, the production of 1 unit of food (F) requires 1/8 of a unit of labour and the production of 1 unit of shelter (S) requires 1/6 of a unit of labour. In Morocco, the production of 1 unit of food (F) requires 1/4 of a unit of labour and the production of 1 unit of shelter (S) requires 1/2 of a unit of labour. Canada has 30 units of labour and Morocco has 60 units of labour. In the absence of trade, Canada produces and consumes 120 units of food and 90 units of shelter, and Morocco produces and consumes 120 units of food and 60 units of shelter. These two products and these two countries are the only ones in the world. When trade is opened up, the two countries trade food for shelter at a 3-to-2 ratio, and 120 units of food and 80 units of shelter are exchanged. On the diagrams provided, draw and clearly label the production possibilities curve for each country. Indicate where each country starts out before trade occurs (with a Co for Canada and a Mo for Morocco). Indicate the point at which each country produces (using a Cp for Canada and a Mp for Morocco) and consumes (using a C* for Canada and a M* for Morocco), and show the trading line (the consumption possibilities curve) for each country. Label your diagram as completely as possible. Below the diagram, describe in 10 words or less how we know that both countries are made better off by trade. (10 marks)

42. In Canada, the production of 1 unit of food (F) requires 1/6 of a unit of labour and the production of 1 unit of shelter (S) requires 1/8 of a unit of labour. In Morocco, the production of 1 unit of food (F) requires 1/4 of a unit of labour and the production of 1 unit of shelter (S) requires 1/2 of a unit of labour. Canada has 60 units of labour and Morocco has 60 units of labour. In the absence of trade, Canada produces and consumes 135 units of food and 300 units of shelter, and Morocco produces and consumes 80 units of food and 80 units of shelter. These two products and these two countries are the only ones in the world. When trade is opened up, the two countries trade food for shelter at a 1-to-1 ratio, and 160 units of food and 160 units of shelter are exchanged. On the diagrams provided, draw and clearly label the production possibilities curve for each country. Indicate where each country starts out before trade occurs (with a Co for Canada and a Mo for Morocco). Indicate the point at which each country produces (using a Cp for Canada and a Mp for Morocco) and the point at which each country consumes (using a C* for Canada and a M* for Morocco), and show the trading line (the consumption possibilities curve or consumption possibilities function) for each country. Label your diagram as completely as possible. Below the diagram, explain in a small number of words what is meant by "the terms of trade". How can we tell the terms of trade by looking at the graph? (10 marks)

Essay questions are due at the end of the course. It is strongly recommended that you accumulate your answers as you complete each unit and don't leave them all until the last minute. Please type your responses to the following short answer/discussion questions and short problems. Although your answers need not be lengthy (generally, 1-2 short paragraphs is fine), you should be careful to respond to all parts of the question asked. It is very important that your answers demonstrate that you have made the effort to read the chapter that relates to the question and thoroughly studied the relevant topic. Answers should be submitted in complete sentence and paragraph form, and writing presentation is important. Please remember that late essay questions are NOT accepted. 1. How is a "market" defined? Distinguish between an industry and a market. (1 point) 2. Suppose a market becomes more competitive over time. What happens to the elasticity of demand for a particular firm's good as its market becomes more competitive? (1 point) 3. Why are the monopolist's and the monopolistically competitive firm's demand curves downward sloping while the competitive firm's demand curve is horizontal? (1 point) 4. Why is a perfectly competitive firm's long-run supply curve the same as its marginal cost curve above the average total cost curve? (1 point) 5. Explain why monopolists do not achieve efficiency. (1 point) 6. Another student advocates the forced break-up of large firms, such as Microsoft and AT&T, on the grounds that they have a lot of monopoly power, which they use to charge inefficiently high prices. According to Schumpeter, would breaking apart these gigantic firms guarantee consumers lower prices? Explain. (1 point) 7. Explain why firms should not shut down in the short run until price falls below average variable cost. (2 points) 8. Suppose your economics professor publicly states that she grades on a curve (i.e., the top 10% of the students get an A, the next 20% get a B, the next 40% get a C, the next 20% get a D, and the lowest 10% fail). The whole class could save itself a lot of work by agreeing privately not to study at all for the final exam and just letting the rankings thus far determine the final grades. Why might such an agreement be difficult to maintain and enforce? Which market structure, if any, is this situation most analogous to? (1 point) 9. Why do firms practice price discrimination? Is efficiency affected by price discrimination? If so, how? (1 point)

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MGEA02H3 Study Guide - Final Guide: Demand Curve, Form 10-Q

MGEA02H3 Full Course Notes

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