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1.
2.
Student: _____________________
Date: _____________________
Instructor: Robin Dhakal
Course: ECON 202 Macroeconomics Assignment: Exam 1- F21
Every society faces trade-offs because we live in a world of scarcity. Suppose a student-athlete has the opportunity to earn
$ next year playing for a minor league baseball team, $ next year playing for a European professional
football team, or $0 returning to college for another year.
1,000,000 100,000
The opportunity cost of the student-athlete returning to college next year is $ . (Enter your response as an
integer.)
Assume the figure to the right illustrates the market for
houses for sale in a small city.  
Suppose the market price of houses is $ . How large
will the resulting surplus be?
200,000
At a price of $ , there will be surplus
houses. (Enter your response as a whole number.)
200,000
What is the equili
ium price of houses?
The equili
ium price is $ . (Enter your
esponse as a whole number.)
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0
25
50
75
100
125
150
175
200
225
250
275
300
Quantity (houses)
P
ic
e
($
10
00
s)
Supply
Demand
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3.
1: Definition
2: Definition
3: Definition
Suppose that the government sets a price floor for milk that
is above the competitive equili
ium price.  
1
Identify the price and quantity sold when there is a price
floor. Then show the change in economic surplus caused
y the price floor. (Note: If you have trouble graphing the
triangle, be sure to drag the "Quantity sold" label out of your
way so that you can plot all three triangle points.)
2
1.) Use the point drawing tool to identify the quantity that is
sold and the price with the price floor. Label the point
'Quantity sold'.
2.) Use the triangle drawing tool to shade the change in
economic surplus as a result of the price floor. If there is an
increase in surplus, label it 'new economic surplus'; if there is
a decrease in surplus, label it 'deadweight loss '.3
Carefully follow the instructions above, and only draw the
equired objects XXXXXXXXXX XXXXXXXXXX
0
2
4
6
8
10
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Quantity of milk
P
ic
e
Price floor A legally determined minimum price that sellers may receive.
Economic surplus The sum of consumer surplus and producer surplus.
Deadweight loss The reduction in economic surplus resulting from a market not being in competitive equili
ium.
Demand
Supply
Price floo
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4.
5.
4: Definition
5: Definition
(1) 1
2
3
4
(2) 1
2
3
4
(3) 1
2
3
4
Below are four supply curve diagrams, each of which represents a change in supply or a change in quantity supplied .4 5
            
Quantity Supplied
P
ic
e
Quantity Supplied
P
ic
e
B
A
Quantity Supplied
P
ic
e
Quantity Supplied
P
ic
e
A
B
Match each scenario with the appropriate diagram.
a. To take advantage of high prices for snow shovels during a snowy winter, Alexander Shovels, Inc., decides to
increase output.  (1) .
. The success of Pepsi's LIFEWTR and Coke's smartwater leads more firms to begin producing premium bottled
water. (2) .
c. In the six months following the Japanese earthquake and tsunami in 2011, production of automobiles in Japan
declined by 20 percent. (3) .
A change in supply results from sellers attempting to sell more at each and every price. This is caused by a change in a
variable other than market price.
A change in quantity supplied is caused by a change in market price and is shown by a movement along the supply curve.
Tim mows neighborhood lawns for extra money. Suppose that he would be willing to mow one lawn for $ , a second lawn
for $ , and a third lawn for $ . Also suppose that three neighbors are interested in having their lawns mowed. Mrs.
Jones would be willing to pay $ to have her lawn mowed, Mr. Wilson would be willing to pay $ , and Ms. Smith would be
willing to pay $ .
13
19 20
32 26
20
If Tim offers to mow lawns for $ each, what will be his producer surplus?   $ . 20
(Enter a numeric response using an integer.)
Considering Mrs. Jones, Mr. Wilson, and Ms. Smith together, what will be their consumer surplus? $ .
1
S1
S2
2
S1
3
S2
S1
4
S1
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6. Explain why a firm's profits are maximized when its marginal revenue (MR) is equal to its marginal cost (MC).
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7.
8.
(1) technically inefficient
technically efficient
unattainable
The figure to the right illustrates the trade-offs facing Ford
Motor Company. The line in the graph is Ford's production
possibilities frontier.
If Ford uses all its resources to produce trucks, how many
can it produce? thousand trucks per day.  
(Enter a numeric response using a real number rounded to
one decimal place.)
Suppose Ford is cu
ently building thousand cars per day.
To build an additional 1 thousand cars, how many fewer
trucks can be built? thousand fewer trucks
per day.
3
According to the graph, building 3 thousand cars per day
and thousand trucks per day is (1) .4
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1
2
3
4
5
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8
9
10
11
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Quantity of cars (1,000s per day)
Q
ua
nt
ity
o
f t
u
ck
s
(1
,0
00
s
pe
d
ay
)
Which two a
ows in the diagram depict the following
transaction: Stanley purchases the novel, "Night of So
ows"
for his summer reading pleasure. Briefly explain why.
PPF
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9.
10.
In the recent few years, the demand for coffee has increased significantly. However, because of the effects of climate
change, the pace of production of coffee has decreased. Using the supply and demand graph, explain how will this affect
the price of coffee and the quantity of coffee in the market? [Make sure to draw the graph and lable every axes and lines.]
Suppose the graph to the right illustrates the market for
toilet paper. Let the production of toilet paper create
pollution (a negative externality) such that the marginal
social cost of toilet paper production is $ more than the
marginal private cost.
225
1.) graph the marginal social cost curve. Label this line ' '.S2
2.) identify the efficient market price and quantity. Label this
point ' '.e2
3.) shade in the deadweight loss created by this externality.
Label this 'DWL'.
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0
50
100
150
200
250
300
350
400
450
500
Quantity (tons of toilet paper per week)
P
ic
e
($
p
e
to
n)
e1
S1
D