Assignment 1 - Econ 130 Fall 2016 Assignment 1 University...

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Unformatted text preview: Econ 130_ Fall 2016_ Assignment 1 University of Hawaii_Manoa Principles of Microeconomics Econ 130_ Fall 2016 Assignment 1 Due on Sep 2, 2016. 1) Define what is Economy? Explain why is it regarded as social science. 2) List all 12 principles of Economics. Pick any six of them and explain with appropriate examples. 3) Define the following terms and provide one example each. i. ii. iii. iv. v. Opportunity cost Scarcity Resources Equilibrium Productive Efficiency and Allocative Efficiency 4) Imagine an economy that consists of You (as a individual) and a Coffee Shop (Starbucks) only. Assume you work in a Starbucks and you receive wages. You use all your wages to buy coffee from Starbucks. Starbucks uses all its revenue from selling coffee to you, to pay your wages and buy ingredients to make coffee. There are two markets in an economy 1) markets for goods and services, and 2) markets for factors of Production. Draw a circular–flow diagram to illustrate the flow of money and factors of production in this economy. 5) Define what is Production Possibilities Frontiers? 6) Consider a simple economy (country A ) producing two goods Pen and Pencils. The following table gives several points on this economy’s production possibility frontier. Pen Pencils 0 420 100 400 200 360 300 300 400 200 500 0 a) Draw Production Possibility of Country A with pen in horizontal axis and pencils in vertical axis. b) If country A produces 100 pens and 400 pencils, what is the opportunity cost of additional 100 pens? c) If country A produces 300 pens and 300 pencils, what is the opportunity cost of additional 100 pens? Instructor: Chandra s Dhakal Econ 130_ Fall 2016_ Assignment 1 d) Why do additional cost of 100 pens in part C causes a greater trade-­‐off than the additional cost of 100 pens in part b? e) Suppose country A uses all its resources to produce pens? How many pen and pencils can country A produce? f) In your diagram show this following points of production by Country A: 1) 200 pens and 200 pencils 2) 100 pens and 400 pencisl 3) 400 pens and 200 pencils 4) 500 pens and 0 pencils 5) 420 pencils and 500 pens g) Indicate which of the above production points are: -­‐ feasible and efficient -­‐ feasible but not efficient -­‐ Not feasible 7) Show the shift in Production Possibility curve if there is a increase in technology that increases the production of both pens and pencils. 8) Show the shift in Production Possibility curve if there is a increase in technology that increases the production of pens only. -­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐Best of luck-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐-­‐ Instructor: Chandra s Dhakal ...
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