Using Figure 9.1, explain what a firm would do in the short run if the market price of its product dropped below P1.
What will be an ideal response?
Ques. 2Explain how the market supply curve is derived. Does the law of supply apply to the market supply curve?
What will be an ideal response?
Ques. 3Using Scenario 1 what would happen to your budget constraint if suddenly you discovered an extra 10 hours in your schedule that you could use to study.
What would happen to the slope of the budget constraint? What would happen to the positioning of the budget constraint?
Ques. 4Homebuilders will often pay the closing costs (title, insurance, etc.) of prospective homebuyers? Explain in terms of supply and demand what homebuilders are trying to do with this practice.
What will be an ideal response?
Ques. 5Why do some utilities have an incentive to exaggerate their costs of production?
What will be an ideal response?
Ques. 6Evaluate the following statement. If a firm is suffering economic losses then the sensible thing to do is to shut down temporarily.
What will be an ideal response?
Ques. 7Using Scenario 1 what would happen to your budget constraint if you came up with a study technique that allowed you to earn 3 points for every hour spent studying economics and still only 2 points for every hour spent studying French? What has
happened to the relative price of one hour of studying French?
Ques. 8When a natural monopoly is regulated using an average cost pricing rule, what can you say about the firm's profit and the market's efficiency?
What will be an ideal response?
Ques. 9Using Scenario 1 what is the maximum grade you could earn in any one course? If you wanted to earn a grade of 90 in French but no better than a 70 in economics are you operating on your budget constraint? Why or why not?
What will be an ideal response?
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