ECON 102 CHAPTER 1

What are the two major ways in which an economy can grow and push out its production possibilities curve?

Increases in resource supplies and advances in technology.

Suppose a city block was going to be used for a parking lot. The opportunity cost would be

greater in New York City because the alternative uses of the block are more valuable.

Suppose that you are given a $100 budget at work that can be spent only on two items: staplers and pens. If staplers cost $10 each and pens cost $2.50 each, then the opportunity cost of purchasing one stapler is:

4 pens.

In a market system scarce goods are allocated through the operation of

what must be sacrificed in using a resource for its next best use.

Studies indicate that married men on average earn more income than unmarried men of the same age and education level. From this statement, we can conclude that

there is a correlation, but marriage is not necessarily the cause of higher income for married men.

Which of the following represent a normative economic statement?

The government ought to lower taxes so people have more money.

Which of the following represents a positive economic statement?

The unemployment rate is 4.8 percent.

How (if at all) do each of the following events affect the location of a country's production possibilities curve?

a. The quality of education increases: Curve shifts outward b. The number of unemployed workers increases: No change c. A new technique improves the efficiency of extracting copper from ore: Curve shifts outward d. A devastating earthquake destroys numerous production facilities: Curve shifts inward

Indicate whether each of the following statements applies to microeconomics or macroeconomics:

a. The unemployment rate in the United States was 8.1 percent in August 2012: Macro b. A U.S. software firm discharged 15 workers last month and transferred the work to India: Micro c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise: Micro d. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009: Macro e. Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point: Micro f. The consumer price index rose by 3.8 percent from August 2011 to August 2012: Macro

Suppose that you initially have $100 to spend on books or movie tickets. The books start off costing $25 each and the movie tickets start off costing $10 each. For each of the following situations, would the attainable set of combinations that you can afford increase or decrease?

a. Your budget increases from $100 to $150 while the prices stay the same: Increase b. Your budget remains $100, the price of books remains $25, but the price of movie tickets rises to $20: Decrease c. Your budget remains $100, the price of movie tickets remains $10, but the price of a book falls to $15: Increase