MICRO ECONOMIC 201 questions

NUMBER ONE {60 points}. Using the production possibilities frontiers for WOMEN and

MEN provided below, explain which group has a comparative advantage over which type of

goods. Is it rational for WOMEN to trade with MEN? Explain. What will keep each group

from trying to overcharge the other for their specialized product? What are some of the barriers

to trade which might keep the two groups apart even if there are mutually beneficial gains from

exchange possible?

Child Care (CC) Income Earning (IE)

WOMEN 100 400

MEN 80 240

NUMBER TWO {60 points}. Suppose there is market for airfares to Caribbean Beach Vacation

Destinations (CBVDs). Consider the following list of factors which might influence the market

for CBVDs:

A. the public becomes more workoriented

and less leisureoriented

B. the income of the public decreases

C. the prices of hotel rooms in the Caribbean beach vacation regions increases slightly

D. the prices of airfares to Colorado ski vacation destinations increases

E. the sales tax imposed on the purchase of airfares increases substantially

F. the cost of jet fuel increases

G. the wages of travel agents decrease

Use the Supply and Demand Model to provide an answer for each of the four complex cases

described below. What happens in the market for Caribbean Beach Vacation Destinations if:

I. A and F occur at the same time

II. B and G occur at the same time

III. C and E occur at the same time

IV. C and D and F occur at the same time

NUMBER THREE {605 points}. The behavioral model of neoclassical microeconomics asserts

that human beings are “selfinterestedand rational.” Yet, we have emphasized the importance of

a human being’s social nature, and especially the importance of acquiring morals and ethics,

essentially from our social settings. When you ask people about what is important to them, most

people mention “family” somewhere near the top of their priorities; rarely is a person so candid

as to admit that they place themselves first.

Is it important to be committed primarily to yourself or to your family? What if someone in

your family breaks the law, or commits a fundamentally immoral act? According to

microeconomics, how does a person decide where to give their loyalty when the interests of one

social group, like the family, are in conflict with the interests of another social group, like the

person’s nation or religion? In summary, what is the economic role of ethics and morals for both

the individual person and the society?

NUMBER FOUR {60 points}. Consider the data on housing prices provided below. Use the

Supply and Demand model to describe some possible components of these changes in housing

prices.

Median Sales Price of Existing SingleFamily

Homes for Metropolitan Areas. [source: National

Association of Realtors.]

2012 2013 2014

USA Average Metro Area 177.2 197.4 208.9

Atlantic City NJ 220.4 218.3 207.6

BloomingtonNormal

IL 156.4 154.0 156.0

Cumberland MDWV

96.2 102.2 92.0

Los AngelesLong

BeachSanta

Ana CA 327.5 405.6 449.5

PortlandVancouverBeaverton

ORWA

232.9 266.5 286.0

San DiegoCarlsbadSan

Marcos CA 385.5 466.3 497.9

San FranciscoOaklandFremont

CA 543.8 669.6 737.6

SeattleTacomaBellevue

WA 300.4 336.3 356.6

NUMBER FIVE {60 points}.

In 1985, the Oregon Legislature passed a law which reads:

ORS 91.225 (1)

The Legislative Assembly finds that there is a social and economic need to insure an adequate

supply of affordable housing for Oregonians. The Legislative Assembly also finds that the

imposition of general restrictions on housing rents will disrupt an orderly housing market,

increase deferred maintenance of existing housing stock, lead to abandonment of existing rental

units and create a property tax shift from rentalowned

to owner occupied

housing. Therefore, the Legislative Assembly declares that the imposition of rent control on housing in the State of Oregon is a matter of statewide concern. Recently, the price charged for rental apartments in Portland OR has been increasing, one report offered the figure of an average 7.0% increase from last year. Some political pressure is being generated currently to repeal the 1985 State Law and to impose Rent Control Laws in Portland. Use the Supply and Demand model to describe what would happen in the market for rental apartments if such a price ceiling scheme were imposed in Portland.