Principles of Microeconomics-Honors
Economics 2106H
Tables

Table 1: Demand and Supply Schedules for Milk:
 Price
Quantity Demanded
Quantity Supplied
$3.00
20
140
$2.80
30
120
$2.60
40
100
$2.40
50
80
$2.20
60
60
$2.00
70
40
$1.80
80
20
$1.60
90
0

Can calculate the slopes of these lines = rise over run = (y2-y1)/(x2-x1). They = -.02 and .01 for demand and supply, respectively.

Table 2: Effect of an increase in income in a two good market
 
 Options
Quantity of x
Quantity of y
Description
(1)
increases
increases
Both x and y are normal
(2)
increases
decreases
x is normal; y is inferior
(3)
decreases
increases
x is inferior; y is normal
(4)
decreases
decreases
Both x and y are inferior

Table 3: Who's Paying Taxes?

2008


 Percentiles
Total % of Adjusted
Gross Income
Total % of Federal Personal Income Tax Paid
What % of Federal Personal Inc. Tax Should this group pay?
Top 1%
A
U
 AA
Top 5%
B
V
BB
Top 10%
C
W
 CC
Top 25%
D
X
DD
Top 50%
E
Y
EE
Bottom 50%
F
Z
 FF
Source: IRS, 1999 data, ranked by adjusted gross income.

Questions:

   1) Do you believe tax rates on top 1% should be raised? top 5%? Top 10%? Top 25%? Top 50%? Bottom 50%?
   2) Fill in above chart. What fraction of total income does each group earn? What fraction of federal personal income tax does each group pay? For example, if you thought that the top 1% of income earners in the nation earns 40% of all income, then you would enter 40% in cell A. If you thought that group paid 20% of all taxes, enter 20% in cell U.
   3) What fraction of federal personal income taxes do you believe the top 1% should pay? Top 5%? Top 10%? Etc.
   4) What is the trend in terms of the wealthy's share of taxes? Is the share of income tax paid by the top 1% and top 5% greater or smaller now than it was 15 years ago?

Table 4: Public Goods

 
RIVAL?
YES
NO
EXCLUDABLE?
YES Private Goods
   Ice cream cones
   Clothing
   Congested toll roads
Natural Monopolies
   Fire protection
   Cable TV
   Unongested toll roads
NO Common Resources
   Fish in the Ocean
   The environment
   Congested non-toll roads
Public Goods
   National defense
   Unprotected Knowledge
   Uncongested non-toll roads


Table 5: Coase Theorem Example
 

Cost to Farmer Cost to RR Property Rights Transaction Costs Outcome
Example 1 $100 $200 RR $0  
Example 2 $100 $200 Farmer $0  
Example 3 $100 $200 RR $150  
Example 4 $100 $200 Farmer $150  
Example 5 $200 $100 RR $0  
Example 6 $200 $100 Farmer $0  
Example 7 $200 $100 RR $150  
Example 8 $200 $100 Farmer $150  


Table 6: Market Structures and Corresponding Characteristics:
Market
Structure 
# of firms
Size Relative to Market
Products
Price Control
Barriers to Entry
Examples
Perfect Competition
Many
Very Small
Same
None
Very low
 
Monopolistic Competition
Many
Small
Similar try to differentiate
Little 
Very low
 
Oligopoly
Small #
Large
Range
Some
Range: often high
 
Monopoly
One
Very Big
Unique
Choose p and quant.
High
 

Table 7: Comparative Advantage:

Time Required to Get Work Done:

Time to:
Michelle
Barack
Clean 1 Apartment
3 hours
2 hours
Paint 1 Apartment
1 hour
4 hours
    Michelle has an absolute advantage in painting and Barack has an absolute advantage in cleaning.

Productivity (per hour) of Each Person:

Time to:
Michelle
Barack
Amount Cleaned in 1 Hour
1/3 Apartment
1/2 Apartment
Amount Painted in 1 Hour
1 Apartment
1/4 Apartment
 
Productivity (per apt) of Each Person (Opportunity Cost):
   Denominate in Apts. painted. For every one apt. Michelle paints, she gives up cleaning 1/3 of an apt. For every 1 apt. Barack paints, he gives up 2 apts. cleaned. Therefore, it is less costly for Michelle to paint.
    Comparative Advantage: Michelle has a comparative advantage in painting and Barack in cleaning.
    Note: when individuals have absolute advantages in different things, then their comparative advantages must also be in those things. However, even if a person has no absolute advantage, they will always have a comparative advantage.
    Gains from trade: Michelle paints both apartments and Barack cleans both apartments. Michelle works 2 hours and Barack works 4 hours - both save two hours by making the trade.


Table 8: Long Run Decision Making: Profit, Revenue and Cost:
Q Rev. (Total)  Rev. (Marg)  Rev. (Ave.)
Cost (Total)
Cost (Marg)
Cost (Ave)
Profit (Total) Prof (Marg)
0 0     0        
1 19     17        
2 36     26        
3 51     33        
4 64     40        
5 75     48        
6 84     57        
7 91     67        
8 96     80        
9 99     99        
10 100     125        

Table 9: Returns to Scale - relationship between inputs and outputs:
Returns to Scale
Costs 
Company Size 
Outputs
Increasing
(Economies of Scale)
As Q goes up,
average cost drops
Very large
Outputs increase at greater rate than inputs
Decreasing (Diseconomies of Scale)
As Q goes up,
average cost increases
Very small
Outputs increase at slower rate than inputs
Constant
As Q goes up,
average cost stays the same 
Any size
Outputs increase at same rate as inputs

Table 10: Short Run Costs
Q FC  VC TC MC AFC AVC ATC
0 50  0 50  -
1 50  50 100 50  50 50 100 
2 50  78 128 28 25 39 64
3 50  98 148 20 16.7 32.7  49.3 
4 50  112 162 14  12.5  28  40.5 
5 50  130 180 18  10  26  36
6 50  150 200 20 8.3  25  33.3 
7 50  175 225 25  7.1  25  32.1 
8 50  204 254 29  6.3  25.5  31.8 
9 50  242 292 38  5.6  26.9  32.4 
10 50  300 350 58  30  35 

Table 11: Decision Making in SR and LR
Case Price Econ. Profit Acct. Profit SR Decision Gain/Loss LR Decision
1 P>ATC>AVC  Profit Profit Q @
P=MC
Get Profit -Firms produce more
-Firms enter
2 ATC>P>AVC  Loss ? Q @
P=MC 
Pay
FC –Rev.
-Firms produce less
-Firms exit
3 ATC>AVC>P  Loss Loss Q=0 Pay FC  -Firms produce less
-Firms exit

Table 12: Monopoly (Demand vs. Marginal Revenue)
Price Q demanded TR MR
11 0  0 -
10 1 10 10
9 2 18 8
8 3 24 6
7 4 28 4
6 5 30 2
5 6 30 0
4 7 28 -2
3 8 24 -4
2 9 18 -6
1 10 10 -8

 Table 13: Oligopoly Collusion and Cheating

 


SAUDI ARABIA



Low Production (Cooperate)
High Production (Cheat)
IRAQ
Low Production (Cooperate)
($2,000/$2,000)
($1,500/$2,500)

High Production (Cheat)
($2,500/$1,500)
($1,000/$1,000)
Note: the first number in the parentheses is the profit from oil sales for Iraq.

-----------------
 

Tax Rates for Married Couples filing Jointly
 2003 Taxable Income
Tax Rate
2002 Taxable Income
$0-$12,000
10.0%
$0-$12,000
$12,000-$47,450
15.0%
$12,000-$46,700
$47,450-$114,650
27.0%
$46,700-$112,850
$114,650-$174,700
30.0%
$112,850-$171,950
$174,700-$311,950
35.0%
$171,950-$307,050
Over $311,950
38.6%
Over $307,050
Source: RIA, CCH, Professor James Young; Wall Street Journal, Thurs 19 Sep. 2002, p. D1.
 

Tax Rates for Married filing Sepearately
 2003 Taxable Income
Tax Rate
2002 Taxable Income
$0-$6,000
10.0%
$0-$6,000
$6,000-$23,725
15.0%
$6,000-$23,350
$23,725-$57,325
27.0%
$23,350-$56,425
$57,325-$87,350
30.0%
$56,425-$85,975
$87,350-$155,975
35.0%
$85,975-$153,525
Over $155,975
38.6%
Over $153,525
Source: RIA, CCH, Professor James Young; Wall Street Journal, Thurs 19 Sep. 2002, p. D2.
 

Tax Rates for Single Filers
 2003 Taxable Income
Tax Rate
2002 Taxable Income
$0-$6,000
10.0%
$0-$6,000
$6,000-$28,400
15.0%
$6,000-$27,9500
$28,400-$68,800
27.0%
$27,950-$67,700
$68,800-$143,500
30.0%
$67,000-$141,250
$143,500-$311,950
35.0%
$141,250-$307,050
Over $311,950
38.6%
Over $307,050
Source: RIA, CCH, Professor James Young; Wall Street Journal, Thurs 19 Sep. 2002, p. D2.
 

Tax Rates for Head of Household
 2003 Taxable Income
Tax Rate
2002 Taxable Income
$0-$10,000
10.0%
$0-$10,000
$10,000-$38,050
15.0%
$10,000-$37,450
$38,050-$98,250
27.0%
$37,450-$96,700
$98,250-$159,100
30.0%
$96,700-$156,600
$159,100-$311,950
35.0%
$156,600-$307,050
Over $311,950
38.6%
Over $307,050
Source: RIA, CCH, Professor James Young; Wall Street Journal, Thurs 19 Sep. 2002, p. D2.