1. Production.

Suppose that bananas are the only variable input in the production of TwoRown
Banana Crepes , with the rest of other inputs kept fixed. Compute for the MP and the AP of bananas
given the production schedule below .
TwoRown
Quantity of Banana Crepes
MP of
Bananas (in Output (in AP of bananas
bananas
crates) number of
packages
0 0
1 10
2 30
3 60
4 100
5 150
6 190
7 220
8 240
9 250
10 250
11 240
12 220
a. Graphically show the relationship between TwoRown Banana Crepe Output vs. the quantity
of bananas used; show as well the relationship between MP and AP vs the number of bananas
used in the production process, below the first graph.
b. Show the three stages of production in your graphs.
c. Which stage is the most efficient level of production? Why?
d. What is the most productive level of production? Why?

2. Cost. Use the same output schedule in Problem #1. Suppose that each crate of banana costs €3 with
the sunk/overhead cost equal to €125,
a. Solve for:
i. Total Fixed Cost (TFC)
ii. Total Variable Cost (TVC) and
iii. Total Cost (TC)
Graph the computed values properly.
b. Solve for the profit when the price of each package of TwoRown Banana Crepes is €6. What
is the production level that will yield the highest profit?

3. National Income Accounting 1.

Given the following data, solve for the Nominal and Real GDP using specific base years.
Assume a simple economy, Haagendazland® , produces only ice cream as its only economic
output, composed of three variants:

Ice Cream Variety Price Quantity Value Price Quantity Value

3K : Kamote, Karrots and 100 80 150 120
Kalabasa
Wasabi and Spinach 120 140 240 170
Medley
Halo-Halo Fiesta 150 140 300 250
GDP (Year 1) GDP (Year 2)
Compute for the: (3 points each)
1. Nominal GDP in Year 1: ______________
2. Nominal GDP in Year 2: ______________
3. Real GDP in Year 1, using Year 1 as a base year: ______________
4. Real GDP in Year 2 , using Year 1 as a base year: ______________
 5. Suppose the economy experienced deflation after year 2 and economists have found out
the nominal GDP for that year increased when compared to year 2. Is there a possibility
of real GDP growth? Explain briefly.

4. National Income Accounting 2.

Fill in the missing values.
Year Current Deflator Real Populatio Per Per Inflation
GNP GNP n capita Capita Rate
Current Real
GNP GNP
1989 178,067 100 46.5 3,829.40
1990 220,957 47.8 3,934 17.5
1991 138.9 190,841 5,387.70
1992 303,644 157.1 193,281 50.3
1993 173.2 51 6,576.90 3,797 10.2
1994 378,745 198,816 52.1

5. Determination of National Income 1.

Income Consumption Change Change mpc Savings

(Y) in C in Y (S)
0 200
100 250
200 275
300 300
400 325
500 350
600 375
700 400
800 425
900 450
1000 475

a. Given the Income-Consumption schedule above, compute for the mpc and mps.
b. Formulate the consumption and the savings functions.
c. Show mathematically and graphically that when Y=C, S=0.

6. Determination of National Income 2.

a. Using the same Income-Consumption-Savings schedule in #6 and assuming investment is
autonomous (i.e, constant), I=150, compute for the Aggregate Expenditure (planned
spending), AE. Assume that the economy is composed of two sectors, hence AE=C+I.
b. Graphically show that when S=I, AE=Y. (Clue: Show Savings-Investment Graph below the
Aggregate Expenditure-GDP graph). Alternatively, you may algebraically prove why S=I is
an equilibrium condition.
c. What would happen if Investment would double (New Investment=300)? What would be
the new equilibrium level of income?

7. National Income Accounting 1.

a. Suppose that at time to , a simple open economy’s Personal Consumption Expenditure is
equal to 35, Investment spending is 20, government spending is equal to 25, with exports
and imports equal to 30 and 20, respectively, compute for the GDP and per capita GDP
until t4.
b. Assumptions: each GDP component grows by 5% and population 3% annually. Assume
population is 50 at to
c. What if NFIA is equal to -10? Compute for GNP and Per capita GNP until t4.