Deck 1: Limits, Alternatives, Choices

Question 1

The marginal opportunity cost of the second unit of pizza is:

A) 2 units of robots.
B) 3 units of robots.
C) 7 units of robots.
D) 9 units of robots.

Answer 1

To find the marginal opportunity cost of second unit of pizza,.

Question 2

What are economic resources? What categories do economists use to classify them? Why are resources also called factors of production? Why are they called inputs?

Answer 2

Economic resources are those natural, human and manufactured resources which are used in the production of goods and services. It includes the wholeWe often classify economic resources in to four categories:
1. Land
2. Labor
3. Capital
4. Entrepreneurial Ability.
These resources are called factors of production because of their assistance in the production process.
These are also called inputs because they are the ingredients which help in finally producing output (goods and services).

Question 3

Construct a table from the data shown on the graph below. Which is the dependent variable and which the independent variable? Summarize the data in equation form.

Answer 3

Table showing study time and the corresponding exam score: Dependent variable is the effect and independent variable causes that effect. Here score is the effect, which is caused by the study timE.So, study time (hours) is an independent variable and exam score (points) is the dependent variablE.To estimate the equation, we have to calculate the vertical intercept and the slope of the line form the given graph.
Vertical intercept = 10 exam score (points)Slope = Change in exam score (points) /Change in study time (hours)= (70-50)/(6-4)= 20/2
= 10
Let E represents exam score (points) and S represents study time (hours) then, the equation for the above line is given as
E = 10 + 10 x S

Question 4

Indicate whether each of the following statements applies to microeconomics or macroeconomics:
a. The unemployment rate in the United States was 8.1 percent in August 2012.
b. A U.S. 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. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009.
e. Last week Wells Fargo Bank
f. The consumer price index rose by 3.8 percent from August 2011 to August 2012.

Question 5

Referring to the table in problem 5, suppose improvement occurs in the technology of producing forklifts but not in the technology of producing automobiles. Draw the new production possibilities curve. Now assume that a technological advance occurs in producing automobiles but not in producing forklifts. Draw the new production possibilities curve. Now draw a production possibilities curve that reflects technological improvement in the production of both goods.

Question 6

Suppose that when the interest rate on

Question 7

What is meant by the term "utility" and how does the idea relate to purposeful behavior?

Question 8

What are the two major ways in which an economy can grow and push out its production possibilities curve?

A) Better weather and nicer cars.
B) Higher taxes and
C) Increases in resource supplies and advances in technology.
D) Decreases in scarcity and advances in auditing.

Question 9

Suppose that C = a + bY , where C = consumption, a = consumption at zero income, b = slope, and Y = income.
a. Are C and Y positively related or are they negatively related?
b. If graphed, would the curve for this equation slope upward or slope downward?
c. Are the variables C and Y inversely related or directly related?
d. What is the value of C if a = 10, b =.50, and Y = 200?
e. What is the value of Y if C = 100, a = 10, and b =.25?

Question 10

Suppose you won $15 on a
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. Does the budget line tell you which of the available combinations of candy bars and bags of peanuts to buy?
dSuppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Has the number of available combinations increased or decreased?

Question 11

Why is money not considered to be a capital resource in economics? Why is entrepreneurial ability considered a category of economic resource, distinct from labor? What are the major functions of the entrepreneur?

Question 12

The accompanying graph shows curve XX ' and tangents at points A , B , and C. Calculate the slope of the curve at these three points.

Question 13

The total opportunity cost of 7 units of robots is:

A) 1 unit of pizza.
B) 2 units of pizza.
C) 3 units of pizza.
D) 4 units of pizza.

Question 14

Because investment and capital goods are paid for with savings, higher savings rates reflect a decision to consume fewer goods for the present in order to be able to invest in more goods for the future. Households in China save 40 percent of their annual incomes each year, whereas U.S. households save less than 5 percent. At the same time, production possibilities are growing at roughly 9 percent per year in China but only about 3.5 percent per year in the United States. Use graphical analysis of "present goods" versus "future goods" to explain the difference between China's growth rate and the U.S. growth rate.

Question 15

In the accompanying graph, is the slope of curve AA ' positive or negative? Does the slope increase or decrease as we move along the curve from A to A '? Answer the same two questions for curve BB '.

Question 16

Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease?

A) Your budget increases from $100 to $150 while the prices stay the same.
B) Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20.
C) Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15.

Question 17

Specify and explain the typical shapes of marginal-benefit and marginal-cost curves. How are these curves used to determine the optimal allocation of resources to a particular product? If current output is such that marginal cost exceeds marginal benefit, should more or fewer resources be allocated to this product? Explain.

Question 18

What are the key elements of the scientific method and how does this method relate to economic principles and laws?

Question 19

Suppose that, on the basis of a nation's production possibilities curve, an economy must sacrifice 10,000 pizzas domestically to get the 1 additional industrial robot it desires but that it can get the robot from another country in exchange for 9000 pizzas. Relate this information to the following statement:
"Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus 'move outside its production possibilities curve.'"

Question 20

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also a fisherman, and he is willing to trade 3 fish for every 1 coconut.
a. On a single figure, draw budget lines for trading with Friday and for trading with Kwame. (Put coconuts on the vertical axis.)
b. What is the slope of the budget line from trading with Friday?
c. What is the slope of the budget line from trading with Kwame?
d. Which budget line features a larger set of attainable combinations of coconuts and fish?
e. If you are going to trade coconuts for fish, would you rather trade with Friday or Kwame?

Question 21

LAST WORD Studies indicate that married men on average earn more income than unmarried men of the same age and education level. Why must we be cautious in concluding that marriage is the cause and higher income is the effect?

Question 22

All points on this production possibilities curve necessarily represent

A) society's optimal choice.
B) less than full use of resources.
C) unattainable levels of output.
D) full employment.

Question 23

Briefly explain the use of graphs as a way to represent economic relationships. What is an inverse relationship? How does it graph? What is a direct relationship? How does it graph?

Question 24

Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:

A) 10 pens.
B) 5 pens.
C) zero pens.
D) 4 pens

Question 25

Graph and label as either direct or indirect the relationships you would expect to find between (a) the number of inches of rainfall per month and the sale of umbrellas, (b) the amount of tuition and the level of enrollment at a university, and (c) the popularity of an entertainer and the price of her concert tickets.

Question 26

What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: Allocating a square block in the heart of New York City for a surface parking

Question 27

State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement.

Question 28

Indicate whether each of the following relationships is usually a direct relationship or an inverse relationship.

A) A sports team's winning percentage and attendance at its home games.
B) Higher temperatures and sweater sales.
C) A person's income and how often he or she shops at discount stores.
D) Higher gasoline prices and miles driven in automobile.

Question 29

Potatoes cost Janice $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. If she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30, how many pounds of potatoes will she purchase? What if she only had $2 to spend?

Question 30

To the right is a production possibilities table for consumer goods (automobiles) and capital goods (forklifts):
a. Show these data graphically. Upon what specific assumptions is this production possibilities curve based?
b. If the economy is at point C, what is the cost of one more automobile? Of one more forklift?
Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length?
c. If the economy characterized by this production possibilities table and curve were producing 3 automobiles and 20 fork lifts, what could you conclude about its use of its available resources?
d. Is production at a point outside the production possibilities curve currently possible? Could a future advance in technology allow production beyond the current production possibilities curve? Could international trade allow a country to consume beyond its current production possibilities curve?

Question 31

Describe the graphical relationship between ticket prices and the number of people choosing to visit amusement parks. Is that relationship consistent with the fact that, historically, park attendance and ticket prices have both risen? Explain.

Question 32

Production possibilities curve ABCDE is bowed out from the origin because:

A) the marginal benefit of pizzas declines as more pizzas are consumed.
B) the curve gets steeper as we move from E to A.
C) it reflects the law of increasing opportunity costs.
D) resources are scarce.

Question 33

For each of the following situations involving marginal cost (MC) and marginal benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units.

A) 3,000 units at which MC = $10 and MB = $13.
B) 11 units at which MC = $4 and MB = $3.
C) 43,277 units at which MC = $99 and MB = $99.
D) 82 units at which MC MB.
E) 5 units at which MB MC.

Question 34

Indicate how each of the following might affect the data shown in the table and graph in Figure 2 of this appendix:
a. GSU's athletic director schedules higher-quality opponents.
b. An NBA team
c.GSU contracts to have all its home games televised.

Question 35

Match each term with the correct definition.
Economics
opportunity cost
marginal analysis
utility
a. The next-best thing that must be forgone in order to produce one more unit of a given product.
b. The pleasure, happiness, or satisfaction obtained from consuming a good or service.
c. The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity.
d. Making choices based on comparing marginal benefits with marginal costs.

Question 36

How does the slope of a budget line illustrate opportunity costs and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes?

Question 37

Erin grows pecans. The number of bushels (B) that she can produce depends on the number of inches of rainfall (R) that her orchards get. The relationship is given algebraically as follows: B = 3,000 + 800R. Match each part of this equation with the correct term.
B slope
3,000 dependent variable
800 vertical intercept
R independent variable

Question 38

Cite three examples of recent decisions that you made in which you, at least implicitly, weighed marginal cost and marginal benefit.

Question 39

Look at Figure 1.3Suppose that the cost of cheese falls, so that the marginal cost of producing pizza decreases. Will the MC curve shift up or down? Will the optimal amount of pizza increase or decrease?

Question 40

Look back at Figure 2, which shows the inverse relationship between ticket prices and game attendance at Gigantic State University. (a) Interpret the meaning of both the slope and the intercept. (b) If the slope of the line were steeper, what would that say about the amount by which ticket sales respond to increases in ticket prices? (c) If the slope of the line stayed the same but the intercept increased, what can you say about the amount by which ticket sales respond to increases in ticket prices?

Question 41

Pham can work as many or as few hours as she wants at the college bookstore for $9 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or at other potential jobs. One potential job, at a café, will pay her $12 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her $10 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her $8.50 per hour for as many hours as she can work. If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore?

Question 42

Explain how (if at all) each of the following events affects the a. The quality of education increases.
B) The number of unemployed workers increases.
C) A new technique improves the efficiency of extracting copper from ore.
D)A devastating earthquake destroys numerous production facilities.

Question 43

The following table contains data on the relationship between saving and income. Rearrange these data into a meaningful order and graph them on the accompanying grid. What is the slope of the line? The vertical intercept? Write the equation that represents this line. What would you predict saving to be at the $12,500 level of income?