Problem Set #1: Chapters 1-4
Due Date: September 20th Name: _______________
1. Discuss the opportunity costs of attending college for four years. Is college more or less costly than you thought it was? Explain. Luckily for me my Education is being paid for the by United States Government. I have had many unforeseen costs, such as rent, bills, food, gas, and many other things.
2. A friend pays for your lunch. Is this an example of a “free lunch”? Why or why not.
There is never a free lunch someone always has to pay something to make that lunch full.
3. Economists say that individuals make decisions at the margin. What does this mean?
They make decisions right at their margin weather that means a price is to high for them at the moment or to low, there will always be the margin that they base their decision of off.
4. Why do people enter into exchanges?
To make profit and transfer funds.
5. What is the difference between positive economics and normative economics? between microeconomics and macroeconomics?
Positive economics makes observations about facts. Normative economics applies judgments to those facts. Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy.
6. What type of relationship would you expect between the following: (a) sales of hot dogs and sales of hot dog buns, (b) the price of winter coats and sales of winter coats, (c) the price of personal computers and the production of personal computers, (d) sales of toothbrushes and sales of cat food, (e) number of children in a family and the number of toys in a family. A. Relative
D. No relative
7. Plot the following data and specify the type of relationship between the two variables. (Place “price” on the vertical axis and “quantity demanded” on the horizontal axis.)
Price of Quantity Demanded
Apples ($)of Apples
8. Plot the following data and specify the type of relationship between the two variables. (Place “price” on the vertical axis and “quantity supplied” on the horizontal axis.)
Price ofQuantity Supplied
Apples ($)of Apples
9. Explain how the following can be represented in a PPF framework: (a) the scarcity condition; (b) choice; (c) opportunity cost; (d) productive efficiency; and (e) unemployed resources.
10. Why are most production possibilities frontiers for goods bowed outward (concave downward)?
11. Pinnacle Paper Products Inc. can produce books or rolls of paper towels. Here is its PPF for the resources and technology it has available:
a. What is gained by choosing to produce at point B, instead of at point A?
You will be able to at least still produce 10 books
b. What is the opportunity cost of choosing to produce at point B, instead of at point A?
10 more books 10 less of toilet paper
c. What is gained by choosing to produce at point C, instead of at point B? Again you will also be able to make more books while only making 20 less rolls of toilet paper
d. What is the opportunity cost of choosing to produce at point C, instead of at point...