Comments on Problem Set #2

Here are some comments I've made to people regarding some of the homework problems. I hope they are helpful to you.

On problem #1

To M. May:

Well, the "missed opportunity" in the milk case is one where too much milk is produced when those resources could have been used for other things. So yeah, "overproduction" is correct.

Also, think about this: who is buying up the excess supply? (yeah, government) Could they use that money for other things? (yeah, think about it).

BTW, elasticity doesn't really play into this problem. Just consider the inefficiencies of the price floor (the surplus milk).

Note also, the price of milk at the price floor is higher than it would have been otherwise (compare to equilibrium).

From the context of the problem, you should assume the schools would be delighted to buy milk at the price of 60-cents. No need to deal with over purchasing it. (The question reads something like "assume schools will buy all that is available at that price.) Of course there is always some waste but that's the nature of goods that spoil. Assume they don't waste any more than usual whether the price is $1, 90 cents, or 60 cents.

On problem #2:

You are asked to calculate the deadweight loss. To do this you first need to identify the deadweight loss on a diagram. Then once you've identified it, and it should be a triangle, you can calculate the area of the triangle using the formula for the area of a triangle:

1/2 x base x height. The answer is in terms of dollars.

On problem #4:

This is really only an elasticity of demand question.

Assume no real change in demand for coffee. Since the problem leads you to believe supply has increased, what happens to the price of coffee? Now, if the price moves this way and the revenues that coffee farmers recieve has fallen, is demand elastic or inelastic?

You do have the analytical tools for this!

No 1:00 class Monday. (11:45 we're still on!)

I will not be able to teach the 1:00 section of Econ 122 today, Monday, Presidents' Day.

As part of the collective bargaining agreement between faculty and "management", we are required to offer some type of alternative assignment so that you, dear students, get your full money's worth.

So here is a two-point extra credit assignment. Yes, two full percentage points added to your overall grade.

Read the following article in Monday's New York Times.

Click on title below.

Company Town Relies on G.M. Long After Plants Have Closed

You may have to register to access the New York Times. If you can't or don't want to register I can email the article to you.

Assignment:

One paragraph: summarize the article. PLUS

One paragraph addressing one of the following:

A. It would suck to be mayor of Anderson, Indiana, because...

B. This just shows the dark side of capitalism...

C. This is the dried up fruit of free trade...

D. What else is new? Social Security has been propping up the rural counties of Western PA for over a generation...

This brief paper is due Friday (February 24) in class. Only in class. No sliding under the door. No email. In class.

This assignment is open to ALL students in my Econ 122 classes. (Both MWF 11:45 and 1:00)

Why major in econonomics?

Most lucrative college degrees

Happy Valentine's Day

From CinciDood and NatalieDee

Answers to Study Questions for Test #1

Here is the key for the sample multiple choice problems found in my I-drive folder.

I had to re-solve these problems and I did it quickly. Let me know if you think there are any errors. (I know, some of these problems are very difficult. I hope to pick some problems that may not be so difficult, but you can always expect a few tough ones.)

1-C, 2-A, 3-A, 4-B, 5-B, 6-B,
7-C, 8-C, 9-B, 10-A, 11-D,
12-D. 13-B, 14-B, 15-B, 16-D, 17-A,
18-B, 19-D, 20-B, 21-A, 22-B, 23-B, 24-C,
25-B, 26-A, 27-A, 28-B, 29-D, 30-C,
31-A, 32-C, 33-B, 34-B, 35-D.

I'll post updates to this blog entry if I need to make changes or offer some explanations.

JJ