Question 1

According to the idea of consumer sovereignty, what will happen in the market for widgets if consumers decide they no longer desire widgets?

Accepted Answer

If consumers no longer desire widgets, they will send a message to producers by not purchasing widgets. Since firms will be unable to make a profit selling widgets, widget-producing firms will go out of business (or switch to producing something else) and widgets will no longer be produced. Thus, the consumers' preferences dictate what is produced.

Question 2

Suppose you could measure the value in monetary terms for the following three things that you could do with your time this Friday evening: a) doing your homework - $50, 2) spending time with your friends - $40 or c) taking a nap - $30. Armed with only this information which activity has the lowest opportunity cost? Which two activities have the same opportunity cost? Based on what you have discovered what is the best use of your time and why?

Accepted Answer

The opportunity cost of doing your homework is only $40 which is the next best available alternative. Spending time with your friends has an opportunity cost of $50 since this is the next best available alternative. And it turns out this is also the opportunity cost of taking a nap as well. Therefore, the best use of your time is to spend it doing your homework since the opportunity cost of doing so is lower than the other two alternatives.

Question 3

What are some of the problems that exist with a laissez-faire economy?

Accepted Answer

Free markets may not always produce the goods and services that people want at the lowest cost. They are not always efficient. Also, income may be distributed unequally.

Question 4

-Refer to Scenario 3. If half the workers build huts and half of the workers gather coconuts, what would be the production on the island?

Accepted Answer

In one day, the inha

Question 5

Why do poor countries often have lower rates of economic growth than richer countries?

Accepted Answer

If a large part of a country's populatio

Question 6

Refer to the information provided in Scenario 1 below to answer the following questions.
SCENARIO 1: Consider the following data for the harvest of crabs versus the harvest of fish off the coast of Virginia in answering the following questions.
  
-Refer to Scenario 1. Graph the production possibilities frontier and calculate the average opportunity cost of any of the first fifteen crabs produced.
   The opportunity cost of the first fifteen crabs is of course the 10 fish given up (15C = 10F). Therefore, the opportunity cost of any one crab is 10/15 F or 2/3 of a fish.

Accepted Answer

The opportunity cost of the fi

Question 7

What is meant by consumer sovereignty?

Accepted Answer

Consumer sovereignty is the id

Question 8

-The table above represents five points on the production possibility frontier for the small country of Baca, which produces only rugs (measured in thousands) and wheat (measured in thousands of bushels):
If the economy is currently at point A, what is the opportunity cost of producing an additional 10,000 bushels of wheat? If the economy is currently at point B, what is the opportunity cost of producing an additional 10,000 bushels of wheat? What if the economy is currently at point D?

Accepted Answer

If the economy is currently at point A,

Question 9

The following table shows output per hour for Mexico and Canada, two countries that produce beer and T-shirts:
   What is the opportunity cost of a bottle of beer for Mexico? What is the opportunity cost of a T-shirt for Mexico? Who has a comparative advantage in producing beer? How can you tell?

Accepted Answer

The opportunity cost of a bottle of beer

Question 10

Assume that two countries are considering trading with each other for the first time. Also assume that one of the countries has an absolute disadvantage in producing everything compared to the other country. How would it still be possible for these two nations to benefit from trade with each other?

Accepted Answer

The reason that it would still be benefi

Question 11

What can we say about the employment of resources if the economy is at a point inside its production possibility frontier?

Accepted Answer

If the economy is at a point i

Question 12

What are the implications for economic growth for countries specializing in capital goods rather than consumer goods? What is the opportunity cost of this decision?

Accepted Answer

All else equal, countries that specializ

Question 13

Refer to the information provided in Scenario 4 below to answer the questions that follow.
SCENARIO 4: Suppose that a state needs to build both prisons and schools with a budget limited to 10 million dollars. Schools cost $1 million each to build and prisons cost $2 million each to build.
-Refer to Scenario 4. Draw the state's production possibilities frontier for the trade-off between schools and prisons.

Accepted Answer

The answer of Refer to the information provided in Scenario...

Question 14

In a laissez-faire economy, what determines the distribution of output?

Accepted Answer

It is determined by income and

Question 15

Refer to the graph above. What is the opportunity cost of going from point A to point B? What is the opportunity cost of going from point B to point A?

Accepted Answer

The opportunity cost of going

Question 16

Suppose that you have saved $100. You can spend it today or you can put it in your savings account for a year and earn 5% interest. What is the opportunity cost of spending the money today?

Accepted Answer

If you put the money in your savings acc

Question 17

Critically evaluate the following statement. "Only poor nations face scarcity. Rich nations have everything they need and have therefore conquered scarcity."

Accepted Answer

Rich nations simply face different choic

Question 18

Assume that a lawyer and a secretary have been working together for two years. The lawyer suddenly realizes that he prepares legal briefs and types faster than the secretary. Upon learning this he decides to let his secretary go. Why might this be a mistake?

Accepted Answer

It might be a mistake if it turns out th

Question 19

Suppose a country produces two goods: corn and cars. New technology is developed that increases the amount of corn that can be produced. Use a graph to show the effect of this graph on the country's production possibility frontier. Explain what occurs in the graph.

Accepted Answer

The production possibility frontier shif

Question 20

If the marginal rate of transformation is constant what can be said of the shape of the production possibilities frontier and why?

Accepted Answer

The marginal rate of transformation is t

According to the idea of consumer sovereignty, what will happen in the market for widgets if consumers decide they no longer desire widgets?

What are some of the problems that exist with a laissez-faire economy?

-Refer to Scenario 3. If half the workers build huts and half of the workers gather coconuts, what would be the production on the island?

Why do poor countries often have lower rates of economic growth than richer countries?

What is meant by consumer sovereignty?

The following table shows output per hour for Mexico and Canada, two countries that produce beer and T-shirts: What is the opportunity cost of a bottle of beer for Mexico? What is the opportunity cost of a T-shirt for Mexico? Who has a comparative advantage in producing beer? How can you tell?

Assume that two countries are considering trading with each other for the first time. Also assume that one of the countries has an absolute disadvantage in producing everything compared to the other country. How would it still be possible for these two nations to benefit from trade with each other?

What can we say about the employment of resources if the economy is at a point inside its production possibility frontier?

What are the implications for economic growth for countries specializing in capital goods rather than consumer goods? What is the opportunity cost of this decision?

In a laissez-faire economy, what determines the distribution of output?

Refer to the graph above. What is the opportunity cost of going from point A to point B? What is the opportunity cost of going from point B to point A?

Suppose that you have saved $100. You can spend it today or you can put it in your savings account for a year and earn 5% interest. What is the opportunity cost of spending the money today?

Critically evaluate the following statement. "Only poor nations face scarcity. Rich nations have everything they need and have therefore conquered scarcity."

Assume that a lawyer and a secretary have been working together for two years. The lawyer suddenly realizes that he prepares legal briefs and types faster than the secretary. Upon learning this he decides to let his secretary go. Why might this be a mistake?

Suppose a country produces two goods: corn and cars. New technology is developed that increases the amount of corn that can be produced. Use a graph to show the effect of this graph on the country's production possibility frontier. Explain what occurs in the graph.

If the marginal rate of transformation is constant what can be said of the shape of the production possibilities frontier and why?

The Scope and Method of Economics

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters

Exam 2: The Economic Problem: Scarcity and Choice

According to the idea of consumer sovereignty, what will happen in the market for widgets if consumers decide they no longer desire widgets?

What are some of the problems that exist with a laissez-faire economy?

-Refer to Scenario 3. If half the workers build huts and half of the workers gather coconuts, what would be the production on the island?

Why do poor countries often have lower rates of economic growth than richer countries?

What is meant by consumer sovereignty?

The following table shows output per hour for Mexico and Canada, two countries that produce beer and T-shirts: What is the opportunity cost of a bottle of beer for Mexico? What is the opportunity cost of a T-shirt for Mexico? Who has a comparative advantage in producing beer? How can you tell?

Assume that two countries are considering trading with each other for the first time. Also assume that one of the countries has an absolute disadvantage in producing everything compared to the other country. How would it still be possible for these two nations to benefit from trade with each other?

What can we say about the employment of resources if the economy is at a point inside its production possibility frontier?

What are the implications for economic growth for countries specializing in capital goods rather than consumer goods? What is the opportunity cost of this decision?

In a laissez-faire economy, what determines the distribution of output?

Refer to the graph above. What is the opportunity cost of going from point A to point B? What is the opportunity cost of going from point B to point A?

Suppose that you have saved $100. You can spend it today or you can put it in your savings account for a year and earn 5% interest. What is the opportunity cost of spending the money today?

Critically evaluate the following statement. "Only poor nations face scarcity. Rich nations have everything they need and have therefore conquered scarcity."

Assume that a lawyer and a secretary have been working together for two years. The lawyer suddenly realizes that he prepares legal briefs and types faster than the secretary. Upon learning this he decides to let his secretary go. Why might this be a mistake?

Suppose a country produces two goods: corn and cars. New technology is developed that increases the amount of corn that can be produced. Use a graph to show the effect of this graph on the country's production possibility frontier. Explain what occurs in the graph.

If the marginal rate of transformation is constant what can be said of the shape of the production possibilities frontier and why?

The Scope and Method of Economics

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs Shocks in the Asad Model

The Labor Market in the Macroeconomy

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing and Transitional Economies

Filters