McConnell, Brue, Barbiero 11th Canadian edition MicroeconomicsANSWERS TO ENDOFCHAPTER AND APPENDIX QUESTIONSChapter 11-3 (Key Question) Cite three examples of recent decisions that you made in which you, at least implicitly, weighed marginal costs and marginal benefits.Student answers will vary, but may include the decision to coinc to class, to skip breakfast to get a few extra minutes of sleep, to attend college or university, or to make a purchase. Marginal benefits of attending class may include the acquisition of knowledge, participation in discussion, and better preparation for an upcoming examination. Marginal costs may include lost opportunities for sleep, meals, or studying for other classes. In evaluating the discussion of marginal benefits and marginal costs, be careful (o watch for sunk costs offered as a rationale for marginal decisions.1-5 (Key Question) Indicate whether each of the following statements applies to microeconomics or macroeconomics:a. The unemployment rate in Canada was 7.0 percent in January 2005.b. A Canadian software firm discharged 15 workers last month and transferred the work to India.c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise.d. Canadian output, adjusted for inflation, grew by 3.0 percent in 2004.e. Last week the Scotia Bank lowered its interest rate on business loans by one-half of 1 percentage point.f. The consumer price index rose by 2.2 percent in 2005.Macroeconomics: (a), (d), and (f)Microeconomics: (h), (c), and (e)1-7 (Key Question) Suppose you won $15 on a Lotto Canada ticket at the local 7-Elcvcn and decided to spend all the winnings on candy bars and bags of peanuts. The price of candy bars is $.75 and the price of peanuts is $1.50.a. Construct a table showing the alternative combinations of the two products that are available.b. Plot the data in your table as a budget line in a graph. What is the slope of the budget line?What is the opportunity cost of one more candy bar? Of one more bag of peanuts? Do these opportunity costs rise, fall, or remain constant as each additional unit of the product is purchased.c. How, in general, would you decide which of the available combinations of candy bars and bags of peanuts to buy?d. Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Why would this budget line be preferable to the old one?Consumption alternativesGoodsABCDEFgovernment establishes a price floor of $4.60 for wheat. What will be the main effects of this price floor? Demonstrate your answer graphically.At a price of $3.70, buyers will wish to purchase 80,000 bushels, but sellers will only offer 73,000 bushels to the market. The result is a shortage of 7,000 bushels. The ceiling prevents the price from rising to encourage greater production, discourage consumption, and relieve the shortage. See the graph below.Question 3-13 (Price Ceiling)osqsnq MdoQcd$4.90$4.60$4.30$4.00$3.70$3.40$3.10GO 657075808590Supply De m andPrice CeilingQuantity (Thousands) ofbushelsAt a price of $4.60, buyers only want to purchase 65,000 bushels, but sellers want to sell 79,000 bushels, resulting in a surplus of 14,000 bushels. The floor prevents the price from falling to eliminate the surplus. See the graph below.Question 3-13 (Price Floor)Quantity (Thousands) of bushels-aqsnq J9da)QudANSWERS TO END-OF-CHAPTER QUESTIONS4- 2 (Key Question) Graph the accompanying demand data and then use the midpoints formula for Ed to determine price elasticity of demand for each of the four possible $1 price changes. What can you conclude about the relationship between the slope of a curve and its elasticity? Explain in a non-technical way why demand is elastic in the northwest segment of the demand curve and inelastic in (he southeast segment.Product priceQuantity demanded$5142332415See the graph accompanying the answer to 4-4. Elasticities, top to bottom: 3; 1.4; .714; .333. Slope docs not measure elasticity. This demand curve has a constant slope of -I (= -1/1), but elasticity declines as we move down the curve. When the initial price is high and initial quantity is low, a unit change in price is a low percentage while a unit change in quantity is a high percentage change. The percentage change in quantity exceeds the percentage change in price, making demand elastic. When the initial price is low and initial quantity is high, a unit change in price is a high percentage change while a unit change in quantity is a low percentage change. The percentage change in quantity is less than lhe percentage change in price, making demand inelastic.4- 4 (Key Question) Calculate total-revenue data from the demand schedule in question 2. Graph total revenue below your demand curve. Generalize on the relationship between price elasticity and total revenue.See th