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1. Your friends go to the movies one evening and you decide to stay home and
do your economics assignment and practice test. You get 80 percent on your economics test compared with the 70 percent that you normally score. What is the opportunity cost of your extra points?
2. You plan to go to school this summer. If you do, you won’t be able to take
your usual job that pays $6,000 for the summer and you won’t be able to live at home for free. The cost of tuition is $2,000 and textbooks are $200 and living expenses are $1,400. What is the opportunity cost of going to summer school? 3. Harold takes two hours off of work to go to the dentist. His firm pays him $25 an hour. The dentist charges Harold $50. What is the opportunity cost of Harold’s trip to the dentist?
4. One tradeoff society faces is between efficiency and equity. Define each term.
If the U.S. government redistributes income from the rich to the poor, explain how this action affects equity as well as efficiency in the economy. 5. With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school year is extended to 11 months per year instead of the existing 9 months per year. 6. Using this outline, draw a circular-flow diagram representing the interactions between households and firms in a simple economy. Explain briefly the various parts of the diagram.
but not prairie dogs since they also eat plant roots. The prairie dog has always been considered a problem for American cattle ranchers.Econ 102(01): Test 1 Review Questions S10 7. a) On a graph. so ranchers decide to allot additional land for prairie dogs. 2 Draw a production possibilities frontier showing increasing opportunity cost for hammers and horseshoes. giving them 10. ranchers have discovered that there is a demand for prairie dogs as pets. They dig holes that cattle and horses can step in and they eat grass necessary for cattle. d) On a graph for hammers and horseshoes. b) On the graph. c) The price of prairie dogs increases to $200 each. 8. e) A drought destroys most of the available grass for grazing of cattle. In some areas prairie dogs can sell for as high as $150. Draw a production possibilities frontier showing a rancher's production option between cattle production and prairie dog production showing increasing opportunity cost and show what would happen in each of the following situations. on this economy. c) On a graph. illustrate the effect a new computerized assembly line in the production of hammers would have.) a) The outcome is efficient. b) As a protest against the government introducing the gray wolf back into the wild in their state. . with ranchers choosing to produce equal numbers of cattle and prairie dogs. ranchers decide not to use 25% of the available grassland for grazing.000 new acres of grassland each for grazing. Cattlemen are now fencing off prairie dog towns on their land so these towns will not be disturbed by their cattle. identify the area of feasible outcomes and the area of unfeasible outcomes. (Use a separate graph for each situation. d) The government grants new leases to ranchers. Recently. a resource needed to make both horseshoes and hammers. illustrate the effect of the discovery of a new vein of iron ore. label a point that's efficient as point "E" and a point that inefficient as point "I".
quantity demanded will increase. other things equal. Identify each of the following topics as being part of microeconomics or macroeconomics: 3 a) The impact of a change in consumer income on the purchase of luxury automobiles b) The effect of a change in the price of coke on the purchase of pepsi c) The impact of a war in the middle east on the rate of inflation in the united states d) e) f) g) h) industry Factors influencing the rate of economic growth Factors influencing the demand for tractors The impact of tax policy on national saving The effect of pollution taxes on the u. d) A little bit of inflation is worse for society than a little bit of unemployment. the demand for automobiles will increase.s. income distribution is not equitable. b) The minimum wage ought to be abolished.Econ 102(01): Test 1 Review Questions S10 9. g) The U. e) There is a tradeoff between inflation and unemployment in the short run. f) If consumer income increases.S. copper industry The degree of competition in the cable television i) The effect of a balanced-budget amendment on economic stability j) industry The impact of deregulation on the savings and loan 10. and which are normative? a) The minimum wage creates unemployment among young and unskilled workers. . c) If the price of a product in a market decreases.Which of the following statements are positive. other things equal.
11. In England. and his opportunity cost of one hour is $20. workers deserve more liberal unemployment If interest rates increase. Which country has a comparative advantage in wine production? The diagram below represents a production possibilities frontier. and her opportunity cost of one hour is $50. Label the unattainable region. 13. In Portugal. Will both Julia and Jacque be better off if she pays him $45 per meal to fix her meals? Explain. the country would be better off.Econ 102(01): Test 1 Review Questions S10 h) benefits. j) If welfare benefits were reduced. a) b) c) d) e) What is the name of the shape of the frontier? Which points are efficient? Which points are inefficient? Label the attainable region. Jacque can fix the same kind of meal in 2 hours. the opportunity cost of a bale of wool is 3 bottles of wine. Are opportunity costs increasing or constant along this PPF? What has to occur in order to reach a point like point C? (two things) f) g) . i) 4 U. 12. Julia can fix a meal in 1 hour.S. investment will decrease. the opportunity cost of 1 bottle of wine is 3 bales of wool.
5 Two countries. A barrel of oil is produced with 4 hours of labour in Mexico and 8 hours of labour in Canada. The tables Country A and Country B give the production possibilities for Country A and Country B respectively: Coffeepots (C) (number per week) 0 25 50 75 T Country B C T Country A Country A Teapots (T) (number per week) 150 100 50 0 Country B Teapots (T) (number per week) 150 100 50 0 Coffeepots (C) (number per week) 0 50 100 150 C Using the above tables and/diagrams answer the following questions: a) List the opportunity cost of producing teapots and coffeepots in Country A and List the opportunity cost of producing teapots and coffeepots in Country B. Which country has a comparative advantage in teapots? Which country has a comparative advantage in coffeepots? Does either Country A or Country B have an absolute advantage in producing any of the goods? Mexico and Canada produce both oil and apples using labour only. Country A and Country B produce only two goods: teapots (T) and coffeepots (C).Econ 102(01): Test 1 Review Questions S10 14. Canada has: a) b) c) d) An absolute advantage in oil production An absolute advantage in apple production A comparative advantage in oil production A comparative advantage in apple production b) c) d) 15. . A bushel of apples is produced with 8 hours of labour in Mexico and 12 hours of labour in Canada.
What are the opportunity costs for both? Who has a comparative advantage in pizza? Who has a comparative advantage in sundaes? Who has an absolute advantage in pizza? Who has an absolute advantage in sundaes? Consider Table 1 and Table 2 below. Draw the production possibilities curve for each table and comment on its shape.Econ 102(01): Test 1 Review Questions S10 16. Assume: 2 workers: Andy and Bob 2 outputs: Pizza and Ice-Cream Sundaes 1 input: 8 hour day 6 Production Possibilities: Andy Pizzas Sundaes a) b) c) d) e) f) 17. 240 100 Bob 80 80 Draw the PPF for both Andy and Bob. Table 1: Production Possibilities Schedule for Wheat and Soybeans: Point A B C D E Bushels of Soybeans 0 10000 20000 30000 40000 Bushels of Wheat 65000 60000 52000 38000 0 Table 2: Production Possibilities Schedule for Wheat and Soybeans: Point A B C D E Bushels of Soybeans 0 10000 20000 30000 40000 Bushels of Wheat 40000 30000 20000 10000 0 .
Now. milk eggs . milk eggs c) Some cows are found to be infected with Mad Cow Disease. with society choosing approximately equal amounts of milk and chicken. 7 Draw a production possibilities frontier representing the economy’s possible production of milk and eggs.Econ 102(01): Test 1 Review Questions S10 18. The outcome for the economy is efficient. Use a separate graph to illustrate each situation. show what will happen to the frontier or the production point under each of the following circumstances. and about one-third of the cows must be destroyed. milk a) eggs b) A recession causes a significant percentage of the labour force to become unemployed.
milk eggs e) Improvements in animal nutrition raise the general productivity of cows and chickens. milk eggs .Econ 102(01): Test 1 Review Questions S10 d) 8 Chickens are infected with a rare disease and egg-laying is reduced by one-half. milk eggs f) Cows and chickens reproduce milk eggs g) The Surgeon General announces that drinking milk prolongs life.
21. c. Table 1 Item Personal consumption expenditures on goods and services Government current expenditure on goods and services Indirect taxes less subsidies Wages and salaries Accrued net income of farm operators Exports of goods and services Depreciation Gross Investment Corporation profits before taxes Interest and miscellaneous investment income Imports of goods and services Net income of non-farm unincorporated business. some production is left out of GDP.Econ 102(01): Test 1 Review Questions S10 19. Identify the immediate effect of each of the following circumstances on Canadian GDP and its components. Define the following terms: a) Transfer payments b) Intermediate goods Table 1 gives data for the Canadian economy in 1960: $ million 25 280 5 181 4 587 20 141 1 026 6 709 4 769 9 153 3 946 1 174 7 222 3 458 20. including rent a) Calculate net domestic income at factor cost b) Calculate GDP income-based c) Calculate GDP expenditure-based . Explain why some final goods and services are not included. 9 GDP is defined as the market value of all final goods and services produced within a country in a given period of time. but intermediate goods produced and not sold are included separately as part of GDP. a. In spite of this definition. 23. b. 22. John buys an Italian sports car. Explain why the value of intermediate goods produced and sold during the year are not included separately as part of GDP. James receives some pension benefits. Henry buys domestically produced tools for his construction company.
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