Problem Set 1 Please provide full and thoughtful answers to the problems.

Also, be sure to make clear which question (and part of question) you are answering at each point. For this first Problem Set, the due date will be Monday midnight at the end of Week 2. 1. For each of the following, describe some of the potential opportunity costs. a. Studying for your economics test. b. Spending two hours playing computer games. c. Buying a car instead of keeping your present one. d. A local community voting to hike property taxes in order to increase local school expenditures and to reduce class size. e. Going to graduate school. (4 points for each part) 2. a. Explain why a "bowed outwards" production possibility frontier depicts increasing costs while a straight line production possibility frontier depicts constant costs. b. Precisely, what are these costs that are referred to in part (a)? c. How does a production possibility frontier depict the concept of scarcity? d. Agree or disagree, and explain. "A producer may have an absolute advantage in the production of a good but may not have a comparative advantage in its production." e. Jack can produce guns and butter. Agree or disagree, and explain. "Given a technological improvement in the production of guns, the opportunity cost of gun production will decrease." (4 points for each part) Problem Set 2 Please provide full and thoughtful answers to the problems. Your answers are due by Monday midnight of this week. In each of the following cases, clearly state whether the statement is "True" or "False" and then provide justification for your response. If you wish, you may include diagrams to help with your explanation. Assume that demand curves slope downwards and that supply curves slope upwards (i.e., their "regular" appearance). Treat each statement as separate and, as in the Quizzes, bear in mind that a statement is "True" only if it is always true. (5 points for each part) 1. "If income level increases, then, (ceteris paribus) people will certainly wish to buy more of Good A." 2. "An increase in the price of Good A (ceteris paribus) will decrease the demand for Good A." 3. "Good A and Good B are substitutes so, if the supply of Good B increases, then (ceteris paribus) the demand for Good A will decrease." 4. "Good A and Good B are substitutes so, if the supply of Good B increases, then (ceteris paribus) the price of Good A will decrease." 5. "An improvement in the productivity of workers who produce Good A (ceteris paribus) will cause the price of Good A to increase." 6. "The imposition of a price ceiling in the market for Good A will certainly cause a shortage of Good A." 7. "If the demand for Good A increases and the supply of Good A increases, then the price of Good A will not change." 8. The market for Good A is in equilibrium. Now demand increases, causing the market to adjust to the new equilibrium. "Consumer surplus has increased and producer surplus has decreased." (You might wish to include a diagram with this one to help with your explanation. You'll need words, too, though!)