University of Calgary Department of Economics Principles of Microeconomics Assignment 1 Econ 201(04) Fall 2019
1. Use the concept of the marginal thinking to evaluate the following statement: “The optimal (best) levels of pollution, crime, and safety are greater than zero.”
2. Explain why a technological improvement in the production of one good means that a country can now produce more of other goods than it did previously. Draw a country’s production possibility frontier to help answer this question.
3. Imagine that you are overseer on a small island that only produces two goods: cattle and wheat. About a quarter of the land is not fertile enough for growing wheat, so this is where cattle are grazed. What would happen (i.e., where would you move on the production possibility frontier) if you tried to produce more and more wheat, extending you planting to less fertile soil? Support your answer with a graph.
4. In ski resorts like Whistler, BC, hotel prices are higher in January and February (inseason when there are more skiers) than in November (oﬀ-season when there are fewer skiers). Use a demand and supply diagram to explain this phenomenon. Identify this a change as either a change in the quantity supplied, quantity demanded, the demand curve, or supply curve.
5. Due to the higher price of canola, Alberta farmers chose to plant more canola in 2008 relative to previous years. Since Alberta farmers can use their land to plant any number of crops (canola, wheat, barley, oats), the increase in the price of canola had consequences also on the other crops market. Analyze what happened at the market for canola and at the market for the other crops. Use a demand and supply diagram to explain this phenomenon. Identify this a change as either a change in the quantity supplied, quantity demanded, the demand curve, or supply curve.
6. The government is considering implementing one of the two policy alternatives to reduce teen smoking: (i) impose a tax on cigarettes or (ii) implement health warnings and increase education around the ill health eﬀects of smoking. Analyze both suggestions using a demand and supply diagram. Identify this a change as either a change in the quantity supplied, quantity demanded, the demand curve, or supply curve.
Comment on this article using the concepts of long run supply and demand and the adjustments that occur between the short and long term in this market.