You may use any outside resources in order to complete it. Simply copying answers from any source, including the textbook or notes, will not be greeted with a high grade. Ignoring parts of a question is not an advisable strategy. The exam will be graded for the accuracy and precision of the economic and mathematical arguments and evidence provided.
1.Explain the producer’s problem using as much detail as possible. Your answer should include an explanation of the problem itself, how they solve it graphically, how price changes affect production decisions, and why prices provide incentives for producers. Use both straight line (individual) and bowed out (societal) PPFs to illustrate the idea. Feel free to incorporate graphs, drawings, and diagrams relevant to the problem. Use made up production capabilities and prices if you wish, too.
2.Explain the consumer’s problem in as much detail as possible. Your answer should include an explanation of the problem itself, brief description of ICs and their properties, how consumers become “happier,” how price or income changes can affect their purchasing decisions, and why every consumer solving their consumer problem individually creates a Pareto efficient outcome for society. Feel free to incorporate graphs, drawings, and diagrams relevant to the problem. Use made up income, prices, and happiness levels if you wish, too.