Exam 1: The Scope and Method of Economics

The manager of a company has been told by his engineers and cost accountants that the marginal cost of producing additional electronic wafers is likely to remain constant at a $.50 each for the hundred thousand in production. Explain what the marginal cost function would look like and why. What is the slope of this cost function?

An engineer has informed the city manager that the marginal cost of an additional car crossing the city bridge is zero? If you were required to draw this cost function on a graph what would it look like? What is the slope of this graph?

In the figure below, is the slope positive or negative? Calculate the slope.

Explain how to calculate the slope of a line. What does the slope measure?

List and describe the two areas of positive economics.

Describe what took place during the Industrial Revolution.

Explain how a model can be useful even if it is not realistic.

Assume that at very low tax rates the government collects a very modest amount of revenue from personal taxes. As the rate is raised the government collects more revenue but at a decreasing rate. Suppose furthermore that at some tax rate of let's say 30% the total amount of tax revenue is maximized. Any tax rate above that leads to a reduction in tax revenue collected. From this information and that contained in the table below graph the relationship between the tax rate and tax revenue with the tax rate on the horizontal axis and tax revenue on the vertical axis.