Chapter 2: The Economic Problem: Scarcity & Choice

 

Chapter 2: The Economic Problem: Scarcity & Choice
20 points
Drop Box Assignment

1. Identify which country has the comparative advantage (page 26) for wine & which country has the comparative advantage for cheese in the following

example. (2 points) Show your work.

WINE CHEESE
FRANCE 12 6
USA 6 8

2. Identify which of the statements apply to microeconomics and which to macroeconomics (page 4) and WHY?: (6 points)
a. Total US output, adjusted for inflation, rose by 2.5 percent in 2016.
b. The consumer price index rose by 2.5 percent in 2016.
c. Last week the Dublin Credit Union raised its interest rate on business loans by .5% .
d. An unexpected freeze in Georgia affected the pecan crop and caused the price of Georgia pecans to rise.
e. The unemployment rate in the US was 2.5 percent in March 2017.
f. The Savannah Software Company laid off 10 employees last month.

3. Yippee! You won $50 on a lotto ticket at the local Piggly Wiggly and decided to spend all the winnings on granola bars and diet cokes. The price of

a granola bar is $2.00 and the price of a diet coke is $3.00. (5 points)

a. Make a simple table showing the combinations of the alternatives that are available. Keep things whole, please. (see the table in question 4 below.)

Make sure each combination totals exactly $50.
b. Graph the data in your table. What is the slope (pages 16-17) of the budget line? (show your calculation)
c. At any point, what is the opportunity cost (page 30) of one more granola bar? Of one more diet coke?
d. How would you decide which combination of granola bars and diet cokes to buy?

4. Below is a production possibilities table for blenders & microwaves: (5 points)
Production Alternatives
TYPE OF PRODUCTION A B C D E F
Blenders 0 10 20 30 40 50
Microwaves 25 20 15 10 5 0

a. Using this data, with blenders on the Y-axis, draw a production possibilities curve.
b. If this economy is at point D, what is the opportunity cost of one more Blender? Of one more Microwave?
c. If this economy were producing 20 blenders and 20 microwaves, what could you conclude about how it’s using its available resources?
d. If this economy were producing 20 blenders and 10 microwaves, what could you conclude about how it’s using its available resources?

5. On way to illustrate that an economic arrangement is inefficient is to show how, through some rearrangement, some people could gain with no else

losing. Use this approach to evaluate the following situation: (2 points)

A $200-per-hour lawyer is at the end of the a 2-hour waiting line at the DMV, and a college student home for spring break, and not working, is at the

front of the line.

 

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