1. Does either firm have a dominant
strategy? Does the game have a Nash equilibrium?
2. When a good is sold at difference
customer, this is known as price discrimination. Graph the MR, MC and demand
curves and show the price and quantity produced with and without price
3. Explain why Lester Brown’s
pessimistic forecast about the world economy never happened
4. A shift in supply will impact market
price more when demand is inelastic and less impact when demand is elastic.
Draw this. During Songkran (Water) festival demand is more inelastic for squirt
guns. But why do squirt guns cost the same today as they do during the Songkran
(water) festival? Between the US and china who has comparative and absolute
advantage in manufacturing squirt guns? Explain.
5. Graph MC, AC, MR, and D and show the
change in consumer and producer surplus as the market moves from perfect
competition to monopoly
6. Consider the market for toothpaste.
Now imagine a new medical report comes out and proves applying toothpaste to
the skin reduces waistline fat. Show on a graph the short run and long run (10
years from now) impact of this news on the price of toothpaste
7. Does this justify government
intervention to put a price ceiling on toothpaste? Show on a graph what impact
such a government price ceiling would have. Who would benefit/lose from such a
8. What are five ways, if you were Prime
Minister, you can support the free market system?
9. Washington State (USA) has a standard
pay scale for government (public) school teachers across the state. Is this
fair and efficient? Discuss in terms of the supply and demand for teachers in
say Seattle, Washington vs. rural towns, and speculate on the salaries of
Seattle private school teachers vs. salaries of rural private school teachers.
10. Consider a company that owns silver
mines in the US, Chile and Thailand. How should it decide how much to produce
at each of those mines (if any) in the next 12 months?
11. To what extent is the used car market
in Chiang Mai perfectly competitive? Answer in terms of the properties of
12. Imagine a situation where CNN and
other news channels report on research that shows adding a cup of tomato juice
to each tank of gas will increase fuel efficiency by 20%. What impact is this
announcement likely to have on the price of tomato juice over the next 3 months
and over the next 5 years? Explain your answers and graph.
13. What would be the outcome of a Thai
government effort to help urban consumer by imposing a retail price ceiling of
10 baht per kg of rice when the market price of Thai rice is 20 baht per kg?
explain and use a graph to illustrate answer
14. An increase in the cost of inputs
(factors of production) will have what impact on the market price and quantity
sold of a commodity for which demand is price elastic? Explain and use a graph
to illustrate answer
15. Consider this statement: “A profit
maximizing firm in a competitive market will choose to produce an output where
its marginal revenue just equals its average cost, and of course it will never
produce at a marginal revenue below its average cost.” Critically evaluate this
16. Silver miners in Idaho (USA), using
lots of specialized equipment produce silver that competes in the world market
with silver produced in South America where labor is much cheaper. For the
hundreds of profit maximizing mining firms, what does this imply about their
relative marginal costs of production in Idaho and South America? Explain
17. Big companies in downtown areas
rarely open their own fitness gyms to serve to their own employees, but
businesses located in remote areas often do run their own gyms. Explain why
both types of businesses may well be making efficient choices and relate your
answer to “economics of scope”.
18. Use the concept of “opportunity cost”
to explain why a large urban taxi company would choose not to own and operate
its own auto body shop to repair damage to its cars?
19. “with a world population now of
nearly 6.5 billion and a worldwide popularity of rice as a basic food staple in
Asia, Africa, and Latin America, as the world population hits over 9 billion by
2050, we seem certain to see great shortages and skyrocketing price for rice.”
Now that you become an economist, evaluate this statement.
20. Assume that John is married to Judy.
Both have full time jobs and they have 3 kids at home. Judy is wonderfully
skilled at cooking, dish washing, and helping kids with homework. John is an
awful cook, and average dishwasher, and so-so tutor (but a great commentator on
TV sports). Because Judy is so skilled, doesn’t it make sense for Judy to cook,
then wash dishes, then tutor the kids (leaving John to concentrate on his
sports TV commentating)?