ECON-2020 HW#1

Assume that the farmer and the rancher each has 24 labor hours available. If each person divides his time equally between the production of meat and potatoes, then total production is

6 pounds of meat and 4.5 pounds of potatoes.

Assume that the farmer and the rancher each has 40 labor hours available. If each person divides his time equally between the production of meat and potatoes, then total production is

7.5 pounds of meat and 6 pounds of potatoes.

Which of the following events would explain the shift of the production possibilities frontier from A to B?

The economy experienced a technological advance in the production of books.

Which two groups of decision makers are included in the simple circular-flow diagram?

households and firms

In the markets for the factors of production in the circular-flow diagram,

households are sellers and firms are buyers.

Which of the following is a decision that economists study?

how much people work; what people buy; how much money people save

According to Adam Smith, the success of decentralized market economies is primarily due to

individuals' pursuit of self-interest.

Absolute advantage is found by comparing different producers'

input requirements per unit of output.

In the circular-flow diagram,

labor flows from households to firms.

Economists make assumptions to

make a complex world easier to understand.

Comparative advantage is related most closely to which of the following?

opportunity cost

Lawrence is a photographer. He has $230 to spend and wants to buy either a flash for his camera or a new tripod. Both the flash and tripod cost $230, so he can only buy one. This illustrates the principle that

people face trade-offs.

The production possibilities frontier provides an illustration of the principle that

people face trade-offs.

The adage, "There is no such thing as a free lunch," is used to illustrate the principle that

people face tradeoffs.

Normative statements are

prescriptive, whereas positive statements are descriptive.

the phenomenon of scarcity stems from the fact that

resources are limited.

Economists believe that production possibilities frontiers are often bowed because

resources are not completely adaptable.

In the simple circular flow diagram, the flow of money from the markets for goods and services to the firms is called

revenue

The production possibilities frontier is used to illustrate some basic economic ideas, including

scarcity. opportunity cost. economic growth.

Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

the United States should produce more pork than what it requires and export some of it to Mexico.

The production possibilities frontier illustrates

the combinations of output that an economy can produce.

Studying which of the following is helpful in learning to think like an economist​?

theory; case studies; examples of economics in the news.

What you give up to obtain an item is called your

opportunity cost.

Which of the following is notone of the four principles of individualdecision making?

Trade can make everyone better off.

At which point is this economy producing its maximum possible quantity of doors?

U

The bowed shape of the production possibilities frontier can be explained by the fact that

the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

A production possibilities frontier is bowed outward when

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A production possibilities frontier can shift outward if

there is a technological improvement.

The circular-flow diagram is a

visual model of the economy.

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

-Susan has an absolute advantage over Paul in washing windows. -Susan has a comparative advantage over Paul in washing windows. -Paul has a comparative advantage over Susan in ironing shirts.

Which of the following steps does an economist take when studying the economy?

-devise theories -collect data -analyze data

In the simple circular-flow diagram,

-households own the factors of production. -households buy all the goods and services that firms produce. -land, labor, and capital flow from households to firms.

Economists, like mathematicians, physicists, and biologists,

-make use of the scientific method. -try to address their subject with a scientist's objectivity. -devise theories, collect data, and then analyze these data in an attempt to verify or refute their theories.

Which of the following combinations of meat and potatoes could the farmer produce in 40 hours?

3 pounds of meat and 3 pounds of potatoes.

Which arrow represents the flow of spending by households?

A, from the markets to goods and services.

Raymond buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute?

A;B lines

The term "invisible hand" was coined by

Adam Smith.

The values in the table represent the amounts of lemonade and pizzas that Alice and Betty can produce in one week without and with specialization and trade. What are Alice and Betty's gains from specialization and trade?

Alice gains 7 pitchers of lemonade and 10 pizzas, while Betty gains 13 pitchers of lemonade and 10 pizzas.

Which arrow represents the flow of goods and services?

B, to the markets from goods and services.

If Box A of this circular-flow diagram represents firms, then which box represents households?

Box b

Which arrow represents the flow of land, labor, and capital?

C, from markets to factors of production.

Which arrow represents the flow of income payments?

D, to markets from factors of production.

Devin works as an attorney for a corporation and is paid a salary in exchange for the legal services he performs. Juan owns office buildings and rents his buildings to companies in exchange for rent payments. If Devin's income is represented by a flow of dollars from Box D to Box B of this circular-flow diagram, then Juan's income is represented by a flow of dollars

From boxD to B

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn.

President Truman once said he wanted to find a one-armed economist because when he asked his economists for advice, they always answered, "On the one hand, ... On the other hand, ..." Truman's observation that economists' advice is not always straightforward

More than one of the above is correct.

The rate of tradeoff between producing chairs and producing couches depends on how many chairs and couches are being produced in

Panel(a)

The rate of tradeoff between producing chairs and producing couches is constant in

Panel(b)

This economy cannotproduce at which point(s)?

Q，S

This economy has the ability to produce at which point(s)?

R,T,U

After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

The marginal benefit of going to Spain increases.

When can two countries gain from trading two goods?

Two countries could gain from trading two goods under all of the above conditions.

The term market failurerefers to

a situation in which the market on its own fails to allocate resources efficiently.

Rational people make decisions "at the margin" by comparing

additional costs and benefits.

Trade can make everybody better off because it

allows people to specialize according to comparative advantage.

Economic models

are simplifications of reality, and in this respect economic models are no different from other scientific models.

Trade between the United States and Guatemala

benefits both the United States and Guatemala.

For two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to

have a comparative advantage in both activities.

Economic models

can be useful, even if they are not particularly realistic.

When describing the opportunity cost of two producers, economists use the term

comparative advantage.

The most obvious benefit of specialization and trade is that they allow us to

consume more goods than we otherwise would be able to consume.

Economists view positive statements as

descriptive, making a claim about how the world is.

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage.

Which of the following concepts cannotbe illustrated by the production possibilities frontier?

equality

Boxes A and B of this circular-flow diagram represent

firms and households.

In the circular-flow diagram, firms produce

goods and services using factors of production. Output using inputs.

The basic principles of economics suggest that

government should become involved in markets when those markets fail to produce efficient or fair outcomes.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

has an absolute advantage in the production of that good.

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park.

Boxes C and D of this circular-flow diagram represent

the markets for goods and services and the markets for factors of production.

Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B,

the opportunity cost is the same as when society moves from point B to point C.

A production possibilities frontier is a straight line when

the rate of tradeoff between the two goods being produced is constant.

Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each car is

the slope of the production possibilities frontier. 3/2 sofas.