Exercise 1 Questions and Answers PDF

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Exercise E201 (Morrison) Fall 2018 Choose the best answer for each question. Your answers are due the start of class on 1. If an economy is producing inside its Production Possibilities Frontier then, a. it is using its resources b. it is using its resources c. such a level of production is d. such ...

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Exercise#1–E201(Morrison)Fall2018 Choosethebestanswerforeachquestion.Youranswersareduebythestartofclasson 1. IfaneconomyisproducinginsideitsProductionPossibilitiesFrontierthen, a. itisusingitsresourcesefficiently; b. itisusingitsresourcesinefficiently; c. suchalevelofproductionisunattainable; d. suchalevelofproductionwouldonlybeattainablethroughtrade. 2. Themarginalbenefityoureceivefromagoodisthemaximumamountyouarewillingtopayfor, a. allofthegoodthatyouconsume; b. onemoreunitofthegood; c. alloftheunitsofthegoodyouconsumedividedbythenumberofunitsyoupurchased; d. onemoreunitofthegooddividedbythenumberofunitsyoupurchased. 3. Inoneday,Stancaneitherplow10acresorplant20acres.Inoneday,Chriscaneitherplow15acresor plant15acres.StanandChriscan, a. gainfromexchangeifStanspecializesinplantingandChrisinplowing; b. gainfromexchangeifStanspecializesinplowingandChrisinplanting; c. exchange,butonlyStanwillgainfromtheexchange; d. exchange,butonlyChriswillgainfromtheexchange. 4. ScarcityinEconomicsmeansthat: a. Wedonothavesufficientresourcestoproduceallofthegoodsandservicesthatwewant; b. Thewantsofpeoplearelimited; c. Theremustbepoorpeopleinrichcountries; d. Shortagesexistinnearlyallmarkets. 

5. Whenachefpreparesadinnerforacustomer,whichofthefollowingisphysicalcapital? a. Thechef; b. Theoven; c. Thefoodingredients; d. Thechef’strainingandexperience. 

6. Opportunitycostis: a. Abouthalfthemonetarycostofaproduct; b. Thedollarpaymentforaproduct; c. Thebenefitderivedfromaproduct; d. Thevalueofthebestalternativeforgoneinmakinganychoice. 

7. Margospends$10,000ononeyear’scollegetuitionandbooks.Theopportunitycostofspendingone yearincollegeforMargois: a. $10,000; b. Whatevershewouldhavepurchasedwiththe$10,000instead; c. Whatevershewouldhaveearnedhadshenotbeenincollege; d. Whatevershewouldhavepurchasedwiththe$10,000pluswhatevershewouldhaveearnedhad shenotbeenincollege. 

8. Whichofthefollowingisthebestexampleofmakingachoiceatthemargin? a. Buyinganewcar; b. Quittingyourjob; c. Drinkinganothercupofcoffee; d. Attendingcollege.

9. ThemarginalbenefitJuliereceivesfromconsumingathirdchocolatebaris, a. themaximumamountsheiswillingtopayforonlythethirdchocolatebar; b. themaximumamountsheiswillingtopayforallthreechocolatebars; c. themaximumamountsheiswillingtopayforallthreechocolatebarsdividedbythree; d. themaximumamountsheiswillingtopayforthethirdchocolatebar,minustheamountshe wouldaccepttosellthatchocolatebar.  10. Economistsusethetermequilibriumtodescribethesituationinwhich: a. Individualsareequal; b. Noindividualwouldbebetterofftakingadifferentaction; c. Noindividualhastheincentivetochangehisorherbehavior d. Noindividualwouldbebetterofftakingadifferentactionornoindividualhastheincentiveto changehisorherbehavior.  11. Aneconomicmodel: a. Isusefulforexplainingpasteconomicconditionsbutnotforpredicting; b. Oftenleadstofaultyconclusionsbecauseoftheassumptionthateverythingelseremains unchanged; c. Neverallowsanythingtochangeintheeconomicsituationthatisbeingdescribed; d. Isasimplifiedversionofrealityusedtounderstandreal‐worldeconomicconditions.  12. ThemayorofGothamcity,worriedaboutapotentialepidemicofdeadlyinfluenzathiswinter,asksan economicadviseraseriesofquestions.Whichthefollowingquestionsisnormative? a. HowmuchvaccinewillbeinstockinthecitybytheendofNovember? b. Ifthecitycharges$25pershot,howmanypeoplewillpaytogettheshot? c. Ifthereisashortageofvaccineinthecity,whomshouldwevaccinatefirst—theelderlyorthe veryyoung?(Assumethatapersonfromonegrouphasanequallikelihoodofdyingfrom influenzaasapersonfromtheothergroup.) d. Ifweoffertopay10%moreperdosetothepharmaceuticalcompaniesprovidingthevaccines, willtheyprovideadditionaldoses?  13. TheDemocraticRepublicoftheCongo(DRC)istheworld’slargestsourceofColtan(usedinallsmart phones)andalargesourceofcopper.Thetablebelowshowsdifferentcombinationsofthosetwogoods thatcanbeproducedbyDRC.(Notethatthetableshowsaconstanttrade‐off).  Coltan Copper 16,000tons 0 12,000tons 50,000tons 8,000tons 100,000tons 4,000tons 150,000tons 0 200,000tons  WhatistheopportunitycostofproducingeachtonofColtan? a. 200.0tonsofcopper b. 12.5tonsofcopper c. 16.0tonsofcopper d. 125.0tonsofcopper 

THEFOLLOWINGDESCRIPTIONRELATESTOBOTHQUESTIONS14‐16:Atlantisisasmall,isolatedisland intheSouthAtlantic.Theinhabitantsgrowpotatoesandcatchfish.Thefollowingtableshowsthe maximumannualoutputcombinationsofpotatoesandfishthatcanbeproduced.Obviously,giventheir limitedresourcesandavailabletechnology,astheyusemoreoftheirresourcesforpotatoproduction, therearefewerresourcesavailableforcatchingfish.  MaximumAnnualOutput QuantityofFish(pounds) QuantityofPotatoes(pounds) Possibilities A 1,000 0 B 800 300 C 600 500 D 400 600 E 200 650 F 0 675  14. Whatistheopportunitycostofincreasingtheannualoutputofpotatoesfrom600to800pounds? a. 1.481poundsoffish b. 0.675poundsoffish c. 1.5poundsoffish d. 1poundoffish 

15. Whatistheopportunitycostofincreasingtheannualoutputofpotatoesfrom200to400pounds? a. 1poundoffish b. 0.25poundsoffish c. 4poundsoffish d. 10poundsoffish 

16. CanAtlantisproduce500poundsofpotatoesand500poundsoffish? a. No,theydonothavetheresourcestoproducethatmuch. b. Yes,butitwouldbeinefficienttodoso. c. Yes,buttheywouldhavetousealloftheirresourcestodoso. d. No,theycanonlyproduceonegoodortheother,notboth. 

17. WhichofthefollowingisNOTrepresentedinthecircular‐flowdiagram? a. Theflowofmoneyandofgoodsandservicesintheeconomy. b. Theflowofmoneyfromhouseholdstofirmswhenthehouseholdpurchasesgoodsandservices. c. Theflowofmoneyfromhouseholdstofirmswhenthehouseholdsellstheirlabor. d. Theflowofmoneyfromfirmstohouseholdswhenthehouseholdsellstheirlabor. 

18. Anormativestatementis, a. Aboutwhatoughttobe; b. Aboutincrementalchanges; c. Isalwaystrue; d. Issomethingthatcanbetestedtoseeifitistrue. 

19. SpecializationandtradeshouldleadtoallofthefollowingEXCEPT: a. Individualslearningspecificskillsandearningasalary; b. Adecreaseintotaleconomicoutput; c. Higherlivingstandards; d. Theexchangeofgoodsandservicesinmarkets. 

20. ThetablebelowshowsthetotaloutputoftheU.S.A.andChina,iftheyspecializeinoneparticularoutput foranentireday.Whatcanwesayabouttradebetweenthesetwocountries? a. BoththeU.S.A.andChinacanbebetteroffiftheU.S.A.specializesinsoybeansandChinainsmart phones,andtheytrade; b. SincetheU.S.A.hasanabsoluteadvantageinproducingbothsoybeansandsmartphones,China wouldbeengaginginunfairtradeandtheU.S.A.willbeworseoffthaniftheydidnottrade; c. BoththeU.S.A.andChinacanbebetteroffiftheU.S.A.specializesinsmartphonesandChinain soybeans,andtheytrade; d. TheU.S.A.wouldnotbewillingtotradewithChinabecausetheU.S.A.hasacomparative advantageinproducingbothsoybeansandsmartphones. 

 U.S.A. China   

Outputifonlysoybeansare produced 1,000poundsofsoybeans 800poundsofsoybeans

Outputifonlysmartphones areproduced 5,000Smartphones 4,800Smartphones...