hw 1 answers - Principles of Microeconomics: Homework 1 Duo...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 6
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 8
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Principles of Microeconomics: Homework 1 Duo Date; Friday 01 February 2008, by the end of the Class. Select the option that provides the single best answer and mark the letter that corresponds to your answer on the answer sheet provided separately. 1. Local farmers reduce the price of their tomatoes at the farmers’ market. The price of corn is 30¢ per ear. A passing economist theorizes that, (reteris paribus, buyers will purchase more tomatoes than before. Which of the following is TRUE? The economist is (a) implying that the price of tomatoes will fall even further. assuming that the price of corn will remain at 30¢ per ear. (c) assuming that tomatoes are of a better quality than before. (d) implying that com is of a poorer quality than before. 2. Which of the following is not given in the textbook as a criterion for judging the results of economic policy? (a) Economic stability #3 Employment (c) Efficiency (d) Equity 3. EconOmic growth may occur if (a) more machines become available. (In) more workers become available. (c) workers become more efficient. fl” All of the above 4. Economics is the study of how scarce resources are used to satisfy unlimited wants. (b) we choose to use unlimited resources. (e) limitless resources are used to satisfy scarce wants. (d) society has no choices. 5. The opportunity cost of Choice X can be defined as (a) the cheapest alternative to Choice X. #9“ the most highly valued alternative to Choice X. (c) the price paid to obtain X. (d) the most highly priced alternative to Choice X. 6. In economics, efficiency means that (3) income is distributed equally ameng all citizens. (b) there is a low level of' inflation and full unemployment of economic resources. (c) total productivity is increasing at a constant and equal rate within each sector of the economy. m the economy is producing these goods and services that citizens desire and is doing so at the least possible cost. 7. Which of the following statements is true? (a) Microeconomics studies consumer behavior, whereas macroeconomics studies producer behavior. (b) Microeconomics studies producer behavior, whereas macroeconomics studies consumer behavior. it} Microeconomics studies behavior of individual households and firms, whereas macroeconomics studies national aggregates. (d) Microeconomics studies inflation and opportunity costs, whereas maero~ economics studies unemployment and sunk cests. 3. Which of the following statements is true? (a) There is a positive relationship between the price of a product and the quantity demanded. “(to There is a positive relationship between the number of umbrellas bought and the amount of rainfall. (c) There is a negative relatiOnship between height and weight. (d) There is a negative relationship between sales of ice cream and neon temperature. 9. Oliver Sudden discovers that if he cuts the price of his tomatoes at the farmers’ market, his sales revenue increases. Expecting similar results, all the other tomato sellers follow his example. They are guilty of committing we the fallacy of composition. (b) the fallacy of post hoc, ergo propter hoe. (c) the fallacy of correlation. (d) ceteris paribus. 10. The quantity of six-packs of Quite Lite beer demanded per week (Qd) in Hometown is described by the following equation: Qd = 400 — lOOP, where P (in dollars) is the price of a six-pack. This equation predicts that (a) 300 six-packs will be bought this week. (b) a $1 rise in price will cause 100 more six-packs to be bought this week. (C) 300 Six-packs will be bought per $100 this week. #9 a 50¢ rise in price will cause 50 fewer six-packs to be bought this week. 1 l. The ceteris paribus assumption is used to (a) make economic theory more realistic. (b) make economic analysis more realistic. (c) avoid the fallacy of composition. ‘39- focus the analysis on the effect of a single factor. Use the following diagram below to answer the next four questions. 12. In the preceding diagram, the slope of the line is I positive and variable. a: I positive and constant. (c) negative and variable. (d) negative and constant. 13. In the preceding diagram, the slope of the line between Point A and Point B is ,5») 5/2. (b) 2/5. (c) —2/5. (d) —5/2. 14. In the preceding diagram, at Point D, the value of Y is (a) 5. (b) s. (c) 19.5. 22. 15. In the preceding diagram, when the line reaches the vertical (Y) axis the value of Y will be III? 2. (b) 5/2. (c) 7. (a) 12. Use the following diagrams to answer the next four questions. Lil: 16. Of the four curves, which curve has a slope that is negative and decreasing? (a) A (b) B C d) D 17. 01‘" the four curves, which curve has a slope that is positive and increasing? at A (b) B (C) C (a) D 13. Of the four curves, which curve has a slope that is positive and decreasing? (a) A ,3» B (G) C (d) D 19. Of the four curves, which curve appears to be described by the equation 32 = x2? ’6th A (b) B (C) C (d) D 20. During the debate about balancing the federal government’s budget, it was proposed that Medicaid benefits be reduced. This proposal was criticized because low-income families (who receive Medicaid) would spend a higher percentage of their income on medical services than high-income families would spend. This argument was based on concerns about (a) economic growth. (13) efficiency. (c) economic stability. fl! equity. Use the following information to answer the next two questions. The Channel Tunnel, linking the United Kingdom and France, was originally planned to cost $100 million. After work had begun and the two excavators were under the English Channel, with $70 million already spent, the estimate of the total bill was revised to $150 million. 21. To an economist, the $70 million that had already been spent is best thought of as a (a) sunk cost that was important in determining whether to complete the project. fl sunk cost that was not important in determining whether to complete the project. (c) marginal cost that was important in determining whether to complete the project. (d) marginal cost that was not important in determining whether to complete the project. 22. At this point the marginal cost of completion was best estimated as (a) $30 milliOn. (13) $50 million. (c) $70 million. $80 million. 23. Because the nation of Arboc is operating at a point inside its ppf, it (a) has fill] employment. fill has unemployed or inefficiently employed resources. (c) must cut output of one good to increase production of another. (d) will be unable to experience economic growth. 24. Arboc commits more of its resources to capital production than does Arhez. should experience a(n) rapid rate of economic growth. Arboc; more (b) Arbez; more (c) Arhoe; less (d) Both; equally 25. Which of the following does not count as a productive resource? Capital resources, such as a tractor 'I" b) Natural resources, such as a piece of farmland fl Financial resources, such as a $20 hill ((1) Human resources, such as a hairdresser Use the following diagram to answer the next four questions. 26. Point E might become attainable if this economy (a) reduces prices. (1)) reduces wages. M improves the quality of its workforce. (d) encourages emigration. 27. A movement from A to B and thcn to C indicates that (a) the cost of additional butter is decreasing. (b) the cost of additional guns is increasing. (c) the economy is becoming more efficient. If the cost of additional butter is increasing. 28. To move from D to A indicates that - ART the opportunity cost would be zero. ' (13) some butter would have to be given up. (c) there would have to be an increase in the quantity of resources. ((1) the opportunity cost would be 7 guns forgone. 29. The opportunity cost of producing another unit of butter is (a) higher at B than at C. #9 lower at D than at C. (c) higher at A than at B. (d) equal at D and at C. 30. A production possibility frontier diagram illustrates all of the following concepts EXCEPT (a) scarcity. fl unlimited wants. (c) constrained choice. (d) the marginal rate of transformation. 31. 0f the following, the least serious problem for laissez-faire economies is (a) unemployment. (b) income inequality. (c) ' inflation. fl satisfaction of consumer sovereignty. Use the following production possibility table to answer the next three questions. Suppose that wheat is on the y-axis. Alternative A B ‘ C D E F Wheat 0 1 2 3 4 5 Tobacco 15 14 12 9 5 0 32. The marginal rate of transformation of a unit of wheat as the economy moves from C to D is (a) 1/3 unit of tobacco production forgone. # 3 units of tobacco production forgone. (c) 9 units of tobacco production forgone. (d) 12 units of tobacco production forgone. 33. The marginal rate of transformation of a unit of tobacco as the economy moves from C to B is M 1/2 unit of wheat production forgone. (b) 1 unit of wheat production forgone. (c) 2 units of wheat production forgone. (d) 12 units of wheat production forgone. 34. An output of 3 units of wheat and 7 units of tobacco indicates that (a! I this economy has poor technology. resources are being used inefficiently. (c) tobacco is preferred to wheat. (d) it is not possible for this economy to produce at a point on the production possibility frontier. 35. Which of the ollowing is most likely to shift the production possibility frontier outward? A sudden expansion in the labor force (b) An increase in stock prices (c) A shift of productive resources from capital goods to consumer goods (d) A general increase in the public’s demand for goods 36. Which of the following is not one of the basic economic questions? (a) What will be produced? [in How will it be priced?I (c) How will it be produced? (d) Who will get what is produced? 37. Private markets work best when ’6). they are competitive. (b) they are regulated by a government agency. (c) a monopolist is present. (d) consumer sovereignty is restricted. 38. Arboc has an increasing-cost production possibility frontier. Its slope must be (a) positive and increasing. (b) positive and decreasing. .M negative and increasing. (d) negative and decreasing. 39. For Jill to have a comparative advantage in the production of pins means that, relative to Jack, with the same resources (3 Jill is relatively better at producing pins than at producing needles. (b) Jill is relatively better at producing both pins and needles. (c) Jill can produce fewer needles than Jack can produce. (d) Jill can produce more pins than Jack can produce. 40. Each of the following is a basic concern of any economic system except (a) the allocation of scarce resources among producers. (b) the mix of different types of output. (c the distribution of output among consumers. the quality of resources allocated among consumers. The following table shows the maximum output of each good in each country, e.g. maximum Arbezani production of goat milk is 6 units. Arboc Arbez Goat milk 3 6 Bananas 5 2 ' 4]. According to the precedingtable, (a) Arboc has a comparative advantage in producing both goods. # Arboc has a comparative advantage in the production of bananas, and Arbez has a comparative advantage in the production of goat milk. (c) Arboc has a comparative advantage in the production of goat milk, and Arbez has a comparative advantage in the production of bananas. (d) Arbez has a comparative advantage in the production of both goods. 42. The nation of Regit has a bowed-out production possibility frontier with potatoes on the vertical axis and steel on the horizontal axis. A movement down along the ppf will incur opportunity costs in the production of steel; a movement up along the ppf will incur opportunity costs in the production of potatoes. # increasing; increasing (1)) « increasing; decreasing (c) decreasing; increasing ((1) decreasing; decreasing 43. Your opportunity cost of attending college does not include I the money you spend on meals while at college. (b) your tuition. (c) the money you spend on traveling between home and college. (d) the income you could have earned if you’d been employed full-time. 44. may be defined as the extra cost associated with an action. , Marginal cost ( ' Sunk cost (c) Opportunity cost 45. (d) Action cost Jean owns a French restaurant—La Creme. Simply to operate this week, he must pay rent, taxes, wages, food costs, and so on. This amounts to $1,000 per week. This evening, a diner arrives and orders a bottle of Chateau Neuf du Pape wine to go with her meal. Jean has none and sends out to Wine World for a bottle. It costs $20, and Jean charges his guest $30. Which of the following is true for Jean? .9). The marginal cost of the wine is $20. (1)) The marginal cost of the wine is $30. (c) The sunk cost of the meal is $1,020. (d) The sunk cost of the meal is $1,030. Use the following information to answer the next five questions. George and Laura live on an island in the Caribbean. Their diet is fishes and biscuits. George can bake 20 biscuits or spear 10 fishes each day, While Laura can bake 48 biscuits or spear l2 fishes each day. For each person, costs remain constant. 46. 47. 48. 49. 50. Which of the following statements is false? (a) For George, the opportunity cost of 1 fish is 2 biscuits forgone. (b) For Laura, the opportunity cost of 1 fish is 4 biscuits forgone. (c) The opportunity cost of 1 fish is greater for Laura than for George. An increase in George’s production of fish requires a decrease in Laura’s production of biscuits. Which of the following statements is true? (a) For George, the opportunity cost of l biscuit is 2 fish forgone. (b) For Laura, the opportunity cost of 1 biscuit is 4 fish forgone. (c) The opportunity cost of 1 biscuit is greater for Laura than for George. M The opportunity cost of 1 biscuit is greater for George than for Laura. For , the opportunity cost of 1 fish is biscuits forgone, which is less than the opportunity cost of 1 fish for . (a) George, 10., Laura ’ George, 2, Laura (c) Laura, 4, George (d) Laura, 1/4, George For , the opportunity cost of l biscuit is fish forgone, which is less than the opportunity cost of l biseuit for (a) George, 1/2, Laura (b) George, 2, Laura (c) Laura, 4, George fl Laura, 1/4, George According to the preceding information, (a) George has a comparative advantage in the production of both goods. # George has a comparative advantage in producing fish, and Laura has a comparative advantage in producing biscuits. (c) George has a comparative advantage in producing biscuits, and Laura has a comparative advantage in producing fish. 9 . (d) Laura has a comparative advantage in the production of both goods. 10 ...
View Full Document

This note was uploaded on 03/31/2008 for the course ECON 2005 taught by Professor Zirkle during the Spring '07 term at Virginia Tech.

Page1 / 10

hw 1 answers - Principles of Microeconomics: Homework 1 Duo...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online