Problem: I will answer the multiple-choice questions and the computation problems from the assessment, showing reasoning and final answers. 1. Question 1 (opportunity cost). Opportunity cost is a measure of costs expressed as alternatives given up. Answer: c) 2. Question 2 (feasible points on PPF). Feasible points are those on or inside the PPF; B and C are on or on the frontier. Answer: a) 3. Question 3 (efficient points on PPF). Efficient points lie on the PPF; C and D lie on the PPF. Answer: c) 4. Question 4 (inefficient after growth). After an outward shift of the PPF, points that are inside the new frontier are inefficient; B (on old frontier) and D (inside old frontier) become inside the new frontier. Answer: b) 5. Question 5 (individuals seek to maximise). Individuals seek to maximise well being. Answer: b) 6. Question 6 (firms attempt to maximise). Firms typically attempt to maximise profits. Answer: c) 7. Question 7 (marginal decision). A marginal decision is buying or selling a bit more or a bit less. Answer: a) 8. Question 8 (absolute advantage). Nicky: 300 dresses vs 40 T-shirts; James: 200 dresses vs 70 T-shirts. Nicky has absolute advantage in dresses and James has absolute advantage in T-shirts. Answer: d) 9. Question 9 (positive statement). A positive statement is descriptive; "The government is more concerned with inflation than unemployment" is descriptive. Answer: d) 10. Question 10 (positive statement). "People are worried about the effects of joining the CSME" is a descriptive statement about beliefs. Answer: b) 11. Question 11 (which is normative?). Normative statements express what ought to be; "Tax levels should be reduced" is normative. Answer: d) 12. Question 12 (which is normative?). "Interest rates should be reduced during a recession" is a policy prescription and thus normative. Answer: a) 13. Question 13 (comparative advantage and trade). Specialisation by comparative advantage and trade allows both countries to consume beyond their production possibilities. Answer: c) 14. Question 14 (price rise of cars effect). A rise in the price of cars leads to a reduction in the quantity demanded (movement along the demand curve). Answer: b) 15. Question 15 (price of Toyota affects demand for Nissan). If Toyota becomes more expensive, consumers substitute toward Nissan, shifting Nissan demand to the right. Answer: c) 16. Question 16 (rise in cinema ticket price result). A rise in the price causes a movement along the demand curve, not a shift. Answer: b) 17. Question 17 (law of price adjustment). When demand exceeds supply then market price will rise. Answer: b) 18. Question 18 (increase in demand for a normal good). An increase in demand for a normal good raises both equilibrium price and equilibrium quantity. Answer: a) 19. Question 19 (steeper demand curve at intersection). At a given quantity, the steeper demand curve is less elastic, so it has the lower elasticity. Answer: d) 20. Question 20 (individual product vs group demand elasticity). Any one product tends to have more elastic demand while demand for the whole group can be inelastic. Answer: b) 21. Question 21 (law of supply illustration). As the price of chicken wings rises, sellers are willing to sell more, illustrating the law of supply. Answer: c) 22. Question 22 (increase in price of gasoline). An increase in the price of gasoline increases the quantity of gasoline supplied (movement along supply). Answer: b) 23. Question 23 (what would NOT shift the supply curve for gasoline). An increase in the price of gasoline changes quantity supplied, not the supply curve, so it would NOT shift supply. Answer: b) 24. (Numbering skip in original) -- 25. Question 25 (Figure 3, price = 50). If price $50 is above the equilibrium price (approx $35), there is a surplus and price will fall toward equilibrium. Answer: b) 26. Question 26 (oranges price $2 vs equilibrium $1.56). Market price $2 is above equilibrium $1.56, so a surplus exists and price will decrease. Answer: d) 27. (Numbering skip in original) -- 28. Question 28 (price elasticity calculation). A 6 percent price increase with a 6 percent decrease in quantity demanded gives elasticity $\frac{-6}{6}=-1$ in signs and absolute value 1. Answer: a) 29. Question 29 (price elasticity of supply). A 30 percent price change causing 15 percent change in quantity supplied gives elasticity $\frac{15}{30}=0.5$, which is inelastic. Answer: b) 30. Question 30 (supply elasticity 2.5). An elasticity of supply equal to 2.5 is elastic (greater than 1). Answer: b) 31. Computation 1a: Equilibrium for Demand $p=100-3q$ and Supply $q=30$. Because supply is fixed at $q=30$, equilibrium quantity is $q=30$. Substitute into demand to find price: $$p=100-3q=100-3\times30=100-90=10$$ Equilibrium: $q=30$, $p=10$. 32. Computation 1b: Equilibrium for Demand $p=100$ and Supply $p=20+4q$. Set demand price equal to supply price: $$100=20+4q$$ Solve: $$4q=80\Rightarrow q=20$$ Price is $p=100$ and equilibrium quantity is $q=20$. 33. Computation 2a: Given $Q_s=200+3P$ and $Q_d=400-P$, find equilibrium. Set $Q_s=Q_d$: $$200+3P=400-P$$ Solve: $$4P=200\Rightarrow P=50$$ Quantity: $$Q=200+3\times50=200+150=350$$ Equilibrium: $P=50$, $Q=350$. 34. Computation 2b: Tax on buyers so $Q_d=400-(2P+T)$ with $T=20$. Set $Q_s=Q_d$: $$200+3P=400-(2P+T)$$ Substitute $T=20$: $$200+3P=400-(2P+20)=380-2P$$ Solve: $$5P=180\Rightarrow P=36$$ Equilibrium quantity: $$Q=200+3\times36=200+108=308$$ Price received by sellers is $P=36$. Price paid by buyers equals seller price plus tax: $$P_{buyer}=P+T=36+20=56$$ Equilibrium: sellers receive $36$, buyers pay $56$, quantity $308$. 35. Table 3.1 part (a): Plot supply and demand for skateboards using the table of $(P,Q_d,Q_s)$ values. Table points are: at $P=300$ $(Q_d=60,Q_s=30)$, $P=400$ $(Q_d=55,Q_s=40)$, $P=500$ $(Q_d=50,Q_s=50)$, $P=600$ $(Q_d=45,Q_s=60)$, $P=700$ $(Q_d=40,Q_s=70)$, $P=800$ $(Q_d=35,Q_s=80)$. From the table, demand is downward sloping and supply is upward sloping, and equilibrium occurs at $P=500$ with $Q=50$. 36. Table 3.1 part (b): Show a price floor in the diagram and explain the impact. If a price floor is set above the equilibrium price it is binding and creates a surplus. Example: if a floor at $600$ is imposed then $Q_s=60$ and $Q_d=45$, creating a surplus of $15$ units. 37. Table 3.1 part (c): Impact of a price ceiling of $550$. Because the equilibrium price is $500$, a ceiling at $550$ is above equilibrium and is non-binding, so it has no effect on the market outcome. Final answers summary (multiple choice answers in order where applicable): Q1 c Q2 a Q3 c Q4 b Q5 b Q6 c Q7 a Q8 d Q9 d Q10 b Q11 d Q12 a Q13 c Q14 b Q15 c Q16 b Q17 b Q18 a Q19 d Q20 b Q21 c Q22 b Q23 b Q25 b Q26 d Q28 a Q29 b Q30 b Equilibrium pair (31a) $q=30$, $p=10$ Equilibrium pair (31b) $q=20$, $p=100$ Qs/Qd (33) $P=50$, $Q=350$ Tax case (34) sellers receive $36$, buyers pay $56$, $Q=308$ Table equilibrium (35) $P=500$, $Q=50$ Price floor example (36) floor above equilibrium creates surplus (e.g. floor $600$ => surplus $15$) Price ceiling $550$ (37) non-binding, no effect.