Microeconomics practice questions.docx - Chapter 1 1 Brian...

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Principles of Microeconomics
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Chapter 16 / Exercise 4
Principles of Microeconomics
Mankiw
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Chapter 1 1) Brian is a college student living off campus. He is studious, yet popular and well-liked. He wants to do well in college but also loves to socialize. What might be some examples of the scarcity that Brian may face? Give at least three examples. 2) Mr. Warbucks is a confused economist who is mixed up about cause and effect. Please help Mr. Warbucks disentangle cause and effect so he can once again understand economics. 3) The night before a science exam, Mark decided to go to the movies with his friends instead of staying home and reviewing and studying the material. He got 55 percent on his test compared with the 80 percent that he normally scores. a. Did Mark face a tradeoff? Explain. b. What was the opportunity cost of his evening at the movies? 4) Anita is learning about economics and while she understands the difference between macroeconomics and microeconomics but is unclear as to the practical differences. She also does not know the difference between positive and normative statements. Provide her with two macroeconomic statements and two microeconomic statements and classify the statements as positive or normative. Please explain your classifications. Chapter 2 1) Evaluate the truth of this statement: “Social institutions such as money, firms, markets, and property rights are not necessary for the economy.” Fully explain your answer. 2) Suppose that Maria buys a new machine for making sweaters that enables her to make 25 sweaters an hour. (She can only 100 scarves per hour.) In one hour, Sally can produce 50 scarves or 5 sweaters. a. Who now has a comparative advantage in producing sweaters? b. Can Sally and Maria still gain from trade? c. Would Sally and Maria be willing to trade 2 sweaters for 30 scarves? Explain your answer. 3) Toyota will continue to produce 3 million cars per year and use the balance of its resources to upgrade its workers’ skills and create new technology. In three years’ time, Toyota plans to produce better cars and be more productive. (Source: Financial Post, April 7, 2014) Based on the news piece above, what is the opportunity cost for Toyota of upgrading its workers’ skills and creating new technology? Explain your answer.
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Principles of Microeconomics
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Chapter 16 / Exercise 4
Principles of Microeconomics
Mankiw
Expert Verified
4) Joe and John produce skis and snowboards. The tables show their production possibilities. Joe produces 10 snowboards and 60 skis a week; John produces 15 snowboards and 10 skis a week. a. Who has a comparative advantage in producing (i) snowboards and (ii) skis? b. If Joe and John specialize and trade 1 snowboard for 1 ski, what are the gains from trade? Chapter 3

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