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Econ101-2014 summer review.pdf

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ECON 101
Ratna Shrestha

Principles of Microeconomics Review Questions 1 Chapters 13 1 Explain if each of the following government policy is motivated by Efficiency or Equity a Regulating cable TV prices b Providing free prescription drugs to people on welfare c Prohibiting smoking in public areas d Preventing mergers between two banks2 The Old Age Security Program provides income for people over age 65 How does this program affect peoples incentives to save while working3 Production PossibilityABCDE Truck 0 10 20 30 40 Corn 70 60 45 25 0 Draw a PPF and explain if this production technology exhibits diminishing marginal returnsproductivity for TruckCorn4 Ivan spends his entire allowance on two goods ice cream cones which cost 1 each and tickets to the movies which cost 5 each What is the opportunity cost of one movie and the opportunity cost of one ice cream cone5 The company that you manage has invested 5 million in developing a new product but the development is not quite finished At a recent meeting your sales people report that the competition from other products has reduced the expected sales of your product to 3 million If it costs you one million to complete your development would you go ahead and do so6 You have a choice between spending 100 you have now or put in a bank account that earns 5 interest What is the opportunity cost of spending now If inflation rate is 3 would you buy something with that 100 now or keep it in the bank 7 AIDS has become an acute problem in Africa a How has the spread of AIDS influenced the PPF of the economies of Africa b How has this affected the opportunity cost of health care services assume diminishing marginal productivity8 Production TableHours required to produce 1 unitCheese Bread England 10 5 Spain 8 2Find opportunity cost of Cheese production in England and Spain What should England export
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