Microeconomic Questions

1. Describe the trade-offs faced by each of the following individuals:

a. Zahida deciding on what courses to take next semester.

b. The CEO considering on which business unit to expand.

c. Two friends thinking about how to spend the weekend.

d. A canteen operator choosing the menu option for the day.

2. Nations with corrupt legal systems typically have lower standards of living than nations with less corruption. Why might that be the case?

3. Generate a circular-flow diagram with clear identification of the product and factor markets based on the following information:

a. May earns RM15 per hour working in a factory.

b. June spends RM6 on a piece of pizza.

c. Apple Bakery pays RM500 for rental.

d. April purchases a new pair of earrings for RM200.

4. An economy consist of three workers; Amir, Ben and Chin. Each works for 10 hours a day and can produce two services: lawn mowing and car wash. In an hour Amir can either mow a lawn or wash a car; Ben a lawn or two cars and Chin two lawns or a car. Calculate the following circumstances labeled as A, B, C and D.

a. All use their time just mowing. (A)

b. All use their time washing cars. (B)

c. All divide their time equally between mowing and washing. (C)

d. Amir sends 5 hours on each while Ben only washes car and Chin only mows. (D)

5. Suppose that in a year a Malaysian can produce 200 pillows or 30 televisions, while a Pakistani 200 pillows or 18 tv sets.

a. Graph the production possibilities frontier for both countries. Identify the points, assuming without trade each spends half their time producing each good.

b. With trade, which country would export pillows and why? (Support with numerical example)

c. What would the term of trade be?