Microeconomics
Why is economics relevant? (5-points)
Identify and explain the three fundamental questions in economics. (5-points)
What is the difference between factor of production and factor price? Give an example of each. (5-
points)
Choice implies opportunity cost. Explain (5-points)
Scarcity implies choice. Explain (5-points)
Tigris produces only two products: tennis balls and tennis racquets. Each worker comes with a fixed
quantity of materials and capital. The economy’s total labour force is fixed at 100 workers. The
following table indicates the amount of balls and racquets that can be produced daily with various
quantities of labour: (25-points)
Use the information in the Table to draw the production possibilities curve (PP1) for Tigris.
Can Tigris produce 200 balls and 60 racquets?
What is the total cost of producing 150 balls?
What is the total cost of producing 75 racquets?
If Tigris is currently producing 230 balls, what is the cost of an additional 20 balls?
If Tigris is currently producing 30 racquets, what is the cost of an additional 20 racquets?
Why is the demand curve downward sloping? Explain. (5-points)
Demonstrate graphically and explain verbally the difference between an increase in the quantity
demanded and an increase in demand. Describe what might have caused each to occur. (15-points)
Your boss told you that a decrease in price would increase demand. Why is your boss wrong? (5-points)
Briefly explain the six determinants of market supply. (5-points)
Explain how a market adjusts to an increase in the supply of a product. (5-points)
Assume the market demand for coffee is initially in equilibrium. Complete the following: (15-points)
Draw a demand and supply diagram to illustrate the initial equilibrium.
Explain the impact on the coffee market if there is an increase in the price of coffee beans.
Graphically illustrate the impact of a price increase of coffee beans on the diagram from