Q1. An industrial breakthrough raises a country's total factor productivity A by 10%. Show how this change involves the graphs of both the production function relating output to capital as well as the construction function relating output to labor.
Q2. The 9/11terrorist attacks caused the US airline travel demand curve to shift left by an estimated 30%. Use a supply as well as demand diagram to show the likely consequence on cost as well as quantity assuming the market is competitive. Point out the magnitude of the likely equilibrium cost as well as quantity effects, for eg. Would you expect equilibrium quantity to change by about 30%? Show how the answer depends on the shape as well as location of the supply as well as demand curves.