1. My contention is the US is not expanding its production possibilities enough to lead to an increase in our PPC sufficient to increase our population’s standard of living. List two policies that the US government could use that would likely increase our PPC over time.
2. My brother has a house worth $400,000 and he has no mortgage as it is paid off! His utility bills and insurance and maintenance cost him about $500 per month and property taxes and all other costs about another $500 per month. He claims it only costs him about $1000 a month for shelter since he has no mortgage. Is he correct from and economist viewpoint? Explain.
3. In an effort to make heating oil more affordable for our population, the US government mandates that heating oil be priced at $3 per gallon, while the market price at present is $4 per gallon. What impact will this policy have on heating oil sales, prices, and the public that heat with oil? Explain.
4. What will likely be the impact of a minimum US wage set at $8 per hour with the market wage for unskilled workers already at $10 per hour? Explain.
5. The ACME Company produces and sells a product used in the health care industry. It currently sells 10,000units per week at a price of $100 per unit. If it lowers its price to $50 per unit, it can sell 13,000 units per week. Calculate and state the price elasticity of demand for this product. Is it elastic, inelastic, or unitary? Explain. To maximize total revenue is the company better off pricing the product at $100 or $50? Explain.
6. For each of the following indicate whether it would result in an increase or decrease in demand or increase or decrease in quantity demanded of Coca-Cola. a. The price of Pepsi, a close substitute for Coke, decreases———– b. The medical community determines that drinking Coke will likely make you healthier————- c. Many young people, typically Coke drinkers, begin to think that Coke drinking is not cool……….. d. The price of Coke decreases sharply————
7. For each of the following indicate whether it would result in an increase or decrease in supply or increase or decrease in quantity supplied of Coca-Cola. a. Sugar, a key ingredient in Coke, has a big price decrease————- b. The price of Coke decreases —– c. The Coca-Cola company expects Coke prices to increase sharply next year———-
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