Principles of Macroeconomics - Assignment Number One

Percentage of Course Grade: 2.5%
Marks per question 10 (I will randomly choose 3 of the 4 questions to mark.)
Total Marks 30

Due Date: May 22 and May 23 beginning of your class.

The following questions are to be handed in to the Instructor as hard copy. In extenuating circumstances I will accept emailed assignments. Shortly following the due date and time, the answer key to the assignment key is posted to the myDouglas course page under “Files”. Once the answer key is up no late assignments will be accepted. You should keep a copy of your work so that you can immediately review your work.

1. Find a news item that deals with a macroeconomic issue. In a few sentences explain why you have chosen this article and what issue it addresses. (10 marks – 4 for article and 6 for explanation)

2. A firm Volley Inc. produces only two goods – volleyballs and nets for the game of volleyball. The firm needs to decide where on its PPF to operate. The table below shoes the marginal benefit and marginal cost of volleyballs, measured in the number of nets per volleyball.

|Balls |Marginal Benefit |Marginal Cost (nets |
| |(nets/volleyball) |/volleyball) |
|1 |12 |3 |
|2 |10 |4 |
|3 |8 |5 |
|4 |6 |6 |
|5 |4 |7 |
|6 |2 |8 |

a. Draw a simple PPF for Volley Inc. (2 marks)

b. Remembering to graph the marginal cost and marginal benefit at the halfway create a graph of the MB and MC. (3 marks)

c. On your graph, label the efficient quantity of balls the firms should produce? (2 marks)

d. If the firms were to produce one more ball than your answer in a, why would that choice be inefficient? Your answer should be no more than a couple of sentences. (3 marks)

3. Demand and Supply Question (Reference Chapter 3)

Draw a stylized graph (no numbers needed) for the market for toaster ovens. Be sure to label your axes of your graph and your equilibrium points.

a. On your graph