Reference no: EM132786645

1) Consider the market for underground bunkers, Zombie movies have caused a spike in demand. Jennifer's construction company has built 50 bunkers so far this year at a total cost to the company of $8 million. If the company builds a 51st bunker, its total cost will increase to $8.18 million. What is the marginal cost of the 51st bunker?

2) You have ten workers who are all equally skilled and who can do each other worker's job with the same efficiency. The first worker does a task worth $100, the second, $90, and so on until the last whose task is worth $10. Worker number one comes to you, demands a raise, and threatens to quit if the raise is not forth coming. How much at most should you be willing to pay worker number one?
3) An owner of a small firm needs to hire some managers. Assume that each manager has time to do only one task. Task A is worth $100,000 to the owner, Task B is worth $75,000, and Task C is worth $50,000. The owner hires only two managers, having one to do Task A and the other Task B. What is the opportunity cost of Task B?

4. Comparative Advantage in international trade: Page 26, #2. Suppose that companies in the United states can produce a car with 200 labor hours and a ton of rice with 20 labor hours. In China it takes 200 labor hours to make a car and 50 labor hours to grow a ton of rice.

a. What is the opportunity cost of producing rice in each country, stated in terms of cars?

b. What is the opportunity cost of cars, stated in terms of rice?

c. What country has comparative advantage in cars?

d. What country has comparative advantage in rice?

5) An international company is producing $50 widgets at a cost of $50,000 and is selling them for $60,000. If it produces a 51st unit, its total sales will be $62,000 and its total cost will be $51,500. Should the company produce the 51st unit?

6) How will the following events affect the production possibility frontier of an economy?

Event A: A large fraction of the work force becomes unemployed.

Event B: The productivity of all work force doubles.

Event C: The government requires dairy farmers to destroy part of their herds.