Economics 201 Microeconomics Assignment 1 Solution, Fall 2019

This document provides a comprehensive solution to a Microeconomics assignment, addressing key concepts such as the scientific method, opportunity costs, and production possibilities frontiers (PPF). The solution includes calculations for marginal cost and marginal benefit, along with explanations of allocative efficiency and supply curve shifts. The assignment also explores comparative advantage and the gains from trade, using figures and graphs to illustrate economic principles. It references several academic sources to support the analysis, offering a detailed and well-structured response to the assignment questions. The solution is intended to help students understand microeconomic principles and improve their problem-solving skills. This resource, available on Desklib, offers a valuable tool for students studying economics, providing insights and guidance to enhance their comprehension of the subject matter and prepare for academic success.

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ECONOMICS 201
MICROECONOMICS ASSIGNMENT 1 FALL 2019

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1. There are no calculations
2. There are no calculations
3.
a)
Figure 1: The point A and B in PPF
(Source: Kreps, 2019)
b)
Marginal cost of wheat = (120000-105000)/(89000-80000)=1.67 t canola
c)
Marginal benefit of canola= (120000-105000)/(89000-80000)= 1.67t Wheat
4.

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Figure 2: The allocative efficiency
(Source: Iossa & Martimort, 2015)
5)
a)Firm 1
Opportunity cost of 1 kale= (200/80)kg= 5/2 kg
Opportunity cost of 1 tomato= ( 80/200) kg= 2/5 kg
Firm 2
Opportunity cost of 1 kale= (90/150)kg = 3/5 kg
Opportunity cost of 1 tomato= (150/90)kg= 5/3 kg
Firm 1 has comparative advantage in tomato while firm 2 has comparative advantage in kale.
b)

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Figure 3: the ppfs before the trade
(Source: Postlewaite, 2016)

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Figure 4: PPF after trade
(Source: Dwivedi, 2016)
c) No graph or calculations.
6)
Figure 5: The changes in the supply curve

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(Source: Martimort et al. 2015)
7)
Figure 6: rightward shift in the supply curve (Technological improvement)
(Source: Postlewaite, 2016)

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Reference
Dwivedi, D. N. (2016). Microeconomics: Theory and Applications. Vikas Publishing House,
pp. 124-179.
Iossa, E., & Martimort, D. (2015). The simple microeconomics of public‐private
partnerships. Journal of Public Economic Theory, 17(1), 4-48.
Kreps, D. M. (2019). Microeconomics for managers. Princeton University Press, pp.45-49.
Martimort, D., Menezes, F., Wooders, M., Iossa, E., & MARTIMORT, D. (2015). The
Simple Microeconomics of Public-Private Partnerships. Journal of Public Economic
Theory, 17(1), 4-48.
Postlewaite, A. (2016). Report of the Editor: American Economic Journal:
Microeconomics. American Economic Review, 106(5), 736-39.