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Zargham A.
College Student majoring in Economics at UC Berkeley with 2 years of teaching experience
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Writing
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Question:

Zargham A.

Microeconomics
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Question:

You run a small restaurant selling tacos in Berkeley. The market wage for highly skilled taco artisan is \$15/hour and the market price for taco is \$5. The ﬁrst artisan you can hire makes 5 tacos an hour. The second artisan makes 4 tacos an hour, the third makes 3 an hour, and the fourth makes 2 an hour. a) Calculate the marginal cost per unit of each artisan. b)Calculate the producer surplus associated with each artisan and determine how many artisans you will hire. c)Ca|culate your total producer surplus.

Zargham A.

a) Marginal Cost per unit is the cost of producing one additional unit of output. Therefore: MC1 = \$15/5 = \$3 Mc2 = \$15/4 = \$3.75 MC3 = \$15/3 = \$5 MC4 = \$15/2 = \$7.5 b) A ﬁrm can beneﬁt from participating in the market. We call this beneﬁt the producer surplus (PS). For any given unit of output sold, producer surplus is the difference between the price of that good and the minimum price a ﬁrm would need to face in order to produce it. In other words, it is the difference between the market price and the marginal cost. Therefore: Ps1=\$5-\$3=\$2 P52 = \$5 - \$3.75 = \$1.25 PS3 = \$5 — \$5 = 0 PS4: \$5- \$7.5: -1.5 Therefore, the ﬁrm will hire 3 artisans as after this hiring further workers only decreases your surplus per worker. c)ln order to solve this, we need Total Revenue (TR) and Variable Cost (VC) PS = TR — vc = (P*Q) = (\$5*(5+4+3)) — (15*3) = \$60 — \$45 = \$15

Macroeconomics
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Question:

Describe the adjustment to long-run equilibrium if an economy's short run equilibrium output is above potential output.

Zargham A.

When output exceeds potential output, unemployment is below the natural rate of employment, and labor market tightness causes wage to rise more rapidly. As the Phillips Curve suggests, this causes firm to raise their prices more rapidly, and, thus increases the inflation rate. As a result, expected inflation will higher in the following time period, and the short-run aggregate supply curve will shift upward. This adjustment process in which inflation and expected inflation rise and the short-run aggregate supply curve shifts upward continues over time until the output falls to the potential output level, the output gap is lowered to zero,and the economy reaches long-run equilibrium.

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