ECON 2113 Microeconomics, Fall 2019 Homework 1 Solution

1a.
Sunscreen (gallons per month)

150

100
Wooyoung’s PPF
50

100 200 300 Food (pounds per month)

1b. N/A

$
1c. 1𝐹 = % 𝑆

1d. 1𝑆 = 2𝐹

1e. The relationship is reciprocal.

2a. Lim has a comparative advantage in producing pie.

2b. Kim: 20 pies and 200 cookies

Lim: 50 pies and 100 cookies

2c. Kim: 400 cookies and 0 pie

Lim: 0 cookie and 100 pies

2d. The highest price of a pie is 10 cookies.

2e. Kim gains nothing, Lim gains 30 pies and 100 cookies.
ECON 2113 Microeconomics, Fall 2019 Homework 1 Solution

3a.
Price $ Oil Market

Supply
800

400

200
Demand
200 400 Quantity (barrel of oil per day)

In equilibrium, 𝑄) = 𝑄* = 𝑄
200 + 𝑄 = 800 − 2𝑄

Equilibrium price: $400

Equilibrium quantity: 200 barrel of oil per day

3b. 𝐶𝑆 = $40000
𝑃𝑆 = $20000
𝑇𝑆 = $60000
The market is efficient (in terms of allocative / productive efficiency), total surplus is
maximized.

The more detailed solution will be provided in the tutorials