Problem 1. You won a free ticket to see an Eric Clapton concert (which has no resale value). Led Zeppelin is performing on the same night and is your next-best alternative activity. Tickets to Zepp cost $75. On any given day, you would be will to pay up to $100 to see Zepp play. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton?
Problem 2. Why is it necessary to equate marginal revenue product with marginal resource costs when optimizing in the resource market? What gets optimized and what is determined? What do these terms actually represent?
Problem 3. What mechanism(s) allow(s) markets to clear? In other words, how exactly does equilibrium come about, what are the forces causing it to occur? How can one tell that equilibrium has been achieved? What's the difference between a flow equilibrium and a stock equilibrium?
Problem 4. Show and explain how minimum wage legislation might cause unemployment under some scenarios but not cause unemployment under others.
Problem 5. How is a labor supply curve derived? What is the impact on the labor supply curve for physicians by illegal immigration? What is the impact for roofers? If there is a difference, explain why. If there is no difference, explain why.
Problem 6. How is an isocost curve determined? Draw an example of an isocost curve and show how it would be impacted by minimum wage legislation.
Problem 7. If there is perfect competition in the labor market but imperfect competition in the product market, what does the representative firm's labor market decision process look like? Explain.
Problem 8. Show how a labor demand curve is derived. Carefully explain the shift factors for the labor demand curve.
Problem 9. What shape do the average and marginal product curves have when the production function is a Cobb-Douglas? Show why they must look that way.
Problem 10. Explain why MRP = MRC at optimality. In what way is this universal?
Problem 11. How are costs tied to the production function? Show and explain.
Problem 12. What insight(s) can be gleaned by the knowledge that costs are tied to short run production functions?
Problem 13. Explain why the MRC curve is not the same as the supply of labor curve.