lab 2 - University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Lab Instructor Michael G Lanyi Lab 2 Chapter 2 The

# lab 2 - University of Lethbridge Department of Economics...

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Page 1 University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Lab Instructor: Michael G. Lanyi Lab # 2 Chapter # 2 –– The Economic Organization of Society Answer Key 1. D Response: The negative slope of the production possibility curve implies that one can get better grades in English only by sacrificing better grades in math. 2. B Response: A production possibility table tells what combinations of goods can be produced, not what combination is best. 3. B Response: The opportunity cost is what must be given up. In this case, to reduce unemployment from 8 to 4%, inflation must rise from 4 to 10%. The change in the inflation rate is the opportunity cost of lowering unemployment. 4. D Response: The opportunity cost of increasing current consumption increases as current consumption rises. The opportunity cost of increasing consumption from 750 to 800 is 160 future consumption units but the opportunity cost of increasing current consumption from 550 to 600 is only 20 future consumption units. 5. A Response: Producing an extra 45 Umies means not producing 30 (40-10) Ums. 6. B Response: Producing an extra 40 roses means not producing 31 (109-78) carnations. 7. C Response: Graph each point and find out that the graph of the table is a straight line or realize that the opportunity cost of 10 Rye is always 2 eggs. Constant opportunity costs are represented by a straight-line production possibility curve. 8. B Response: This is the only curve along which opportunity cost is constant and equal to 0.8 turkeys per chicken. 9. E Response: From this graph we can tell that with the given inputs, the following combinations are possible [eggs, rye]: (20, 0), (15, 10), (10, 10), (5, 30) and (0, 40).
Page 2 10. A Response: Finishing 2 more math problems means not finishing 1 (4-3) economics problems. 11. A Response: Moving from point B to A means giving up 4 articles for 8 CDS. Thus, the opportunity cost is 4/8 or 1 2 .

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