PRINCIPLES OF MICROECONOMICS

FINAL ASSIGNMENT

1. The table below shows the total production a firm will be able to obtain if it employs varying amounts of resource X while the amounts of the other resources the firm employs remain constant. Compute the marginal product of each of the seven units of resource X and enter these figures in the table. Assume the product the firm produces sells in the market for $3.00 per unit. Compute the total revenue of the firm at each of the eight levels of output and the marginal revenue product of each of the seven units of resource X. Enter these figures in the table below.

On the basis of your computations complete the firm’s demand schedule for resource X by indicating in the table below how many units of resource X the firm would employ at the given prices.

2. Use the following total-product schedule for a resource to answer the next three questions. Assume that the quantities of other resources the firm employs remain constant.

(a) If the firm’s product sells for a constant $2 per unit, what is the marginal revenue product of the third unit of the resource?

(b) If the firm’s product sells for a constant $2 per unit and the price of this resource is $8, how many units of the resource will the firm employ?

(c) If the firm can sell 12 units of output at a price of $1.00 per unit and 21 units of output at a price of $0.80 per unit, what is the marginal revenue product of the second unit of the resource?

3. The table below summarizes the marginal product data for labor in producing personal computers. Assume the other quantities employed by the firm remain constant. Compute the MP_L, TR, and MRP and answer the following questions.

(a) What type of market is the one for personal computers?

Now look at the table below showing a different market situation for the demand for personal computers. Fill in the table and answer the following questions.

(b) What type of market does the firm face for personal computers?

4. Complete the following table, where L is the units of labor, TP_L is the total product of labor, MP_L is the marginal product of labor, P is product price, TR is total revenue, and MRP_L is the marginal revenue product of labor.

(a) In what type of market is the firm selling its product? How do you know?

(b) Why does the MRP schedule decrease as labor increases?

(c) Complete the following table.

5. What factors explain the high level of level of productivity in the United States?

6. Use the following data to answer the question.

How many units of labor will this firm hire in maximizing its profits?

7. What are the three different union strategies pursued to increase wages?

8. Use the extreme points from a production possibilities schedule below to draw two straight line production possibilities curves for two nations, A and B using the below graphs. Assume constant costs.

(a) What is the cost ratio for the two products?

(b) If each nation specializes according to comparative advantage, who should produce and trade each product? Why?

(c) What will be the range for the terms of trade? If the terms are set at 1 food = 2 clothing, show how the trading possibilities lines will change in the graph. Explain.

9. Explain how the “Buy American” theme hurts Americans.

10. What is the purpose of the World Trade Organization and its current activity?