practiceQuestionAnswers-1

practiceQuestionAnswers-1 - ANSWERS TO PRACTICE QUESTIONS...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
ANSWERS TO PRACTICE QUESTIONS CHAPTER 1 Page 6 1.No, this person is not behaving rationally. In this case, the individual continues to engage in an action they wish to stop because of physical addiction. 2a. The two variables are (i) the economic welfare of the country's citizens, and (ii) the quantity of the country's economic resources. b. The quantity of the country's economic resources is the independent variable (since it is the cause) and the economic welfare of the country's citizens is the dependent variable (since it is the effect). c. The relationship is direct, because a movement in the independent variable's value leads to a movement of the dependent variable's value in the same direction. d. The statement is positive, since it is a description of reality that does not depend on value judgements. e. For the country described in the statement, the economic problem of scarcity has become more severe. Page 12 1a. The opportunity cost of the first fish is 4 coconuts, since coconut production is reduced from 24 to 20 when the first fish is caught. Similarly, the opportunity costs of the second and third fish are 8 (= 20-12) and 12 (= 12-0) coconuts. b. These results conform with the law of increasing opportunity costs, because as fish production is increased so is the opportunity cost of each new caught fish. c. The curve bows out to the right, reflecting the law of increasing opportunity costs. d. Besides the assumption that only two goods are produced, we must assume that the quantity of the castaway's resources and the technology he uses are fixed, and that his resources are employed to their full capacity. e. With more labour devoted to acquiring coconuts and fish, the castaway's production possibilities curve shifts outwards, with both its vertical and horizontal intercepts increasing. f. With a new capital asset that can be used to acquire fish, the castaway's production possibilities curve shifts outwards, with its horizontal intercept (but not its vertical intercept) increasing. 2a. Since 1 computer must be sacrificed to gain 600 new hamburgers when moving from points d to c , then the opportunity cost of each of these hamburgers is 1/600 of a computer. b. When moving from points b to c , 1 computer must be sacrificed to gain 300 new hamburgers, which means that the opportunity cost each of these hamburgers is 1/300 of a computer. 3a.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Production Possibilities Curve d c b a 0 5 10 15 20 25 30 0 1 2 3 4 Coconuts Fish b. Yes, the curve bows out to the right. This shows that, as more of one item (e.g. fish) is produced, the higher the opportunity cost of these additional units of the item. Page 22 a. Beta is likely to have more economic freedom, given the greater importance of Beta's private sector and the consumer sovereignty it promotes. b. Alpha is likely to have more economic stability, because of the relative importance of its traditional and public sectors. Both of these sectors tend to reduce economic instability.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 05/13/2010 for the course ECN ecn110 taught by Professor Ibrahimhayani during the Winter '10 term at Ryerson.

Page1 / 45

practiceQuestionAnswers-1 - ANSWERS TO PRACTICE QUESTIONS...

This preview shows document pages 1 - 3. Sign up to view the full document.

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