Economics Take-Home Final Exam Solution - York University, Winter 2019

This document presents a complete solution to the AP ECON 3240M take-home final exam from York University's Department of Economics, Winter 2019. The solution covers a wide range of microeconomic concepts, including cost analysis, total revenue, marginal revenue, and profit maximization. It delves into the application of these concepts through numerical examples, tables, and graphical representations. The assignment also explores labor economics, including the calculation of marginal product, marginal revenue product, and the determination of optimal employment levels. Furthermore, the solution addresses topics such as unemployment benefits, the causes of unemployment, implicit costs, efficiency wages, the insider-outsider theory, and the role of labor unions in efficiency and wage determination. The document provides detailed answers and explanations, supported by relevant economic principles and theories.

Running head: ECONOMICS
Economics
Name of the university
Name of the student
Author note

ECONOMICS
Answer 1
Q TR MR AFC AVC ATC TC MC PROFIT VC FC
0 0 100 0 100
1 115 100 35 135 135 35 -20 35 100
2 210 95 50 35 85 170 35 40 70 100
3 285 75 33.33 35
68.3333
3 205 35 80 105 100
4 340 55 25 35 60 240 35 100 140 100
5 375 35 20 35 55 275 35 100 175 100
6 390 15 16.67 35
51.6666
7 310 35 80 210 100
7 385 -5 14.29 35
49.2857
1 345 35 40 245 100
8 360 -25 12.5 35 47.5 380 35 -20 280 100
9 315 -45 11.11 35
46.1111
1 415 35 -100 315 100
10 250 -65 10 35 45 450 35 -200 350 100
11 165 -85 9.09 35
44.0909
1 485 35 -320 385 100
a.
The total fixed cost of the firm is 100
b.
Provided in the above table
c.

ECONOMICS
0 1 2 3 4 5 6 7 8 9 10 11
-400
-300
-200
-100
0
100
200
300
400
500
600
TR MR AFC AVC ATC
TC MC PROFIT VC FC
Answer 2
L MP MRP Q TR TC MFC PROFIT
1 20 200 20 200 110
6.11111
1 90
2 18 180 38 380 220 6.875 160
3 16 160 54 540 330
7.85714
3 210
4 14 140 68 680 440
9.16666
7 240
5 12 120 80 800 550 11 250
6 10 100 90 900 660 13.75 240
7 8 80 98 980 770
18.3333
3 210
8 6 60 104 1040 880 27.5 160
9 4 40 108 1080 990 55 90
10 2 20 110 1100 1100 10 0
b.
Optimal level of employment is 5 where maximum profit is 250
c.

ECONOMICS
1 2 3 4 5 6 7 8 9 10
0
200
400
600
800
1000
1200
MP MRP Q TR
TC MFC PROFIT
Answer 3
L MP MRP TP TR W TLC MFC
1 20 200 20 200 20 20 3
2 18 180 38 380 40 80 5
3 16 160 54 540 60 180 7
4 14 140 68 680 80 320 9
5 12 120 80 800 100 500 11
6 10 100 90 900 120 720 13
7 8 80 98 980 140 980 15
8 6 60 104 1040 160 1280 17
9 4 40 108 1080 180 1620 19
10 2 20 110 1100 200 2000 10
The optimal level of output is at 5

ECONOMICS
1 2 3 4 5 6 7 8 9 10
0
500
1000
1500
2000
2500
MP MRP TP TR W TLC MFC
Answer 4
L MP W MRPL
1 20 20 200
2 18 40 180
3 16 60 160
4 14 80 140
5 12 100 120
6 10 120 100
7 8 140 80
8 6 160 60
9 4 180 40
10 2 200 20
a.
The employment level is 100 and the wage rate is 5 since till that point MRPL is greater than
W.

ECONOMICS
Answer 5
The unemployment benefits have both advantages as well as disadvantage in the society.
However, unemployment benefits can lead to destruction of jobs. When unemployment
benefits are extended for too long, people tend to stay unemployed and thus it does not solve
the problem of unemployment (Bade and Parkin 2015). The unemployment benefit also
creates a reservation wage, below which no employees will want to work. It also negatively
affects the stability of the working careers.
Answer 6
There are basically seven causes of unemployment which leads to either cyclical
unemployment, frictional unemployment of the structural unemployment. One of the main
cause of the unemployment is the increase in the growth of population. Unemployment also
results when employees voluntarily leave the workforce which tends to frictional
unemployment (Bauer 2018). Another reason of unemployment is globalization which leads
to change in the pattern of trade where many people lost jobs as production shifted to lower
cost countries. Large number of technological advamacements also resulted to the
unemployment. computers and the other advanced technologies can perform more complex
tasks in a matter of time which does not require humans.
Answer 7
Implicit cost
The implicit cost is the opportunity cost which is equal to what a firm should be giving up for
using a factor of production foe which it already owns. It can also be termed as the cost
which has already occurred and are not necessarily reported as a separate expense. It is
therefore, the opportunity cost which arises when a company uses the internal resources
towards a project without any explicit compensation for utilizing its resources.

ECONOMICS
Efficiency wage
The idea of efficiency wage states that rise in the wages will be leading to rise in the
productivity of labor. The efficiency wage are higher than the market wage paid for
encouraging higher output and raising the morale of the worker.
Insider- outsider theory
The insider- outsider theory is a theory of labor economics which explains about the behavior
of the firms, national welfare and negotiations of wage which are affected by a group in a
more privileged position.
Answer 8
Efficiency is concerned with the optimal production and allocation of resource while equity is
concerned on how resources are distributed throughout the society. Therefore, the rate of
union membership and the degree of union activism are higher in Canada than in the United
State
Answer 9
The labor union help in increasing efficiency though it plays role in raising wages. The union
workers helps in earning higher wages and can also increase the consumer demand. It reduces
inefficient level of income inequality (Baumol and Blinder 2015). It is known to fight against
discrimination, reduce employee turnover rates, contributes more in income taxes. In this
way, the labor union helps in increasing efficiency.
Answer 10
It is true that trade unions help in increasing the wages in the economy. However, it cannot
increase employment and efficiency in the economy. Therefore, it can be said that trade
unions can cause inefficiency and unemployment in the economy (Bade and Parkin 2015).

ECONOMICS
The trade union will be pushing the wages above the equilibrium wage rate and this rise in
the real wage lead to unemployment. Trade unions can increase wage but those outside of the
union will be facing unemployment.

ECONOMICS
Reference list
Bade, R. and Parkin, M., 2015. Foundations of microeconomics. Pearson.
Bauer, M.J.R., 2018. Principles of microeconomics.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Cowell, F., 2018. Microeconomics: principles and analysis. Oxford University Press.
Fine, B., 2016. Microeconomics. University of Chicago Press Economics Books.
Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private partnerships.
Journal of Public Economic Theory, 17(1), pp.4-48.
Khalil, F., Lawarree, J. and Scott, T.J., 2018. Applied Microeconomics.
Kreps, D.M., 2019. Microeconomics for managers. Princeton University Press.