Mirco 1
How do economists measure the benefit you get from something? Economists measure the benefit you get from something by _______.
what you are willing to give up to get it
The table shows a farm's production possibilities. If the farm uses its resources efficiently, what is the farm's opportunity cost of increasing its production of chicken from 300 pounds to 500 pounds a year? The farm incurs an opportunity cost of _______. Soybean (bushels per year) Chicken(pounds per year) 500 and 0 400 and 300 200 and 500 0 and 600
200 bushels of soybeans a year
Jeb makes the following four statements about peanuts. Which statement best describes his quantity demanded in the peanut market?
At a price of $1 per pack, I plan to buy 2 packs of peanuts per week.
Bob and Emma each own an ice cream parlor. In an hour, Bob can produce 8 milkshakes or 40 ice cream sundaes and Emma can produce 22 milkshakes or 132 ice cream sundaes. What is Bob's opportunity cost of producing 1 milkshake? What is Emma's opportunity cost of producing 1 milkshake? Who has a comparative advantage in milkshakes and who has an absolute advantage in both goods? _______ has a comparative advantage in milkshakes and _______ has an absolute advantage in both goods.
Bob's opportunity cost of producing 1 milkshake is 5 ice cream sundaes. Emma's opportunity cost of producing 1 milkshake is 6 ice cream sundaes.
Ezra and Debra are the only people in an isolated village who grow apples and peaches. Under what conditions does Ezra have a comparative advantage in growing apples? What happens if Ezra has an absolute advantage in growing apples and peaches? Ezra has a comparative advantage in growing apples if _______. If Ezra has an absolute advantage in growing apples and peaches, he will _______.
Ezra's opportunity cost of producing apples is less than Debra's oppurtuity cost of producing apples have a comparative advantage in one activity but not both
Every week, Hassan does gymnastics for two hours, and his grade on each econ test is 75 percent. Last week, after working out for two hours, Hassan considered working out for another hour. He decided to work out for another hour and cut his study time by one hour. But last week, his econ grade fell to 60 percent. Did Hassan make his decision on the margin?
Hassan made his decision at the margin because he considered the benefit and cost of one additional hour of gymnastics.
Which of the following statements describes a change in the quantity supplied and which describes a change in supply? I Farms are selling less chicken because the price of turkey has increased. II Farms are selling less chicken because the price of chicken has fallen. III Farms are selling more chicken because the price of chicken has risen. IV Farms are selling more chicken because the cost of chicken feed has fallen.
I and IV are changes in supply and II and III are changes in the quantity supplied.
Which of the following statements about the market for chicken describes a change in the quantity demanded and which describes a change in demand? I People are buying less chicken because the price of beef has fallen. II People are buying less chicken because the price of chicken has increased. III People are buying more chicken because the price of chicken has fallen. IV The cost of chicken feed has increased.
I is a change in demand and II and III are changes in the quantity demanded.
Which of the following events in the market for smartphones illustrates the law of demand? 1. The price of a smartphone falls. 2. Producers announce that smartphone prices will fall next month. 3. The price of a call made from a smartphone falls. 4. The price of a call made from a land-line phone increases. 5.An increase in memory makes smartphones more popular.
Only Event #1
Which of the following events in the market for timber beams illustrates the law of supply? 1. The wage rate of sawmill workers rises. 2. The price of sawdust rises. 3. The price of a timber beam rises. 4. The price of a timber beam is expected to rise next year. 5. A new law is introduced that reduces the amount of forest that can be cut for timber. 6. A new technology lowers the cost of producing timber beams.
Only Event #3
Sara and Fran produce boards and sails for windsurfing. The tables show their production possibilities. Each week, Sara produces 12 boards and 9 sails and Fran produces 6 boards and 8 sails. What is Sara's opportunity cost of producing a board? What is Fran's opportunity cost of producing a board? Who has the comparative advantage in production? Sara's Production Possibilities Boards (per week) Sails (per week) 30 and 0 24 and 3 18 and 6 12 and 9 6 and 12 0 and 15 Fran's Production Possibilities Boards (per week) Sails (per week) 10 and 0 8 and 4 6 and 8 4 and 12 2 and 16 0 and 20
Sara's opportunity cost of producing a board is 0.50 sails. Fran's opportunity cost of producing a board is 2.0 sails. Sara; boards because her opportunity cost of producing a board is lower than Fran's opportunity cost of producing a board
Consumers eating higher food costs With higher gasoline prices, the demand for ethanol increased. Because ethanol is made from corn, the price of corn rose, which in turn increased the price of bread, chicken, cheese, and the fast-foods that use cheese. As people in China and India become richer, they are eating more beef and chicken and less rice and tofu—another source of higher food prices in the United States. Source: USA TODAY, September 6, 2007 Explain why food prices in the United States will rise as people in India and China become richer and can afford to buy beef and chicken.
The demand for food produced in the United States increases, the demand curve shifts rightward, and the price of food rises.
Consider the U.S. market for Caribbean cruises. Suppose the price of a Caribbean cruise rises. What is the effect of this event on the quantity of Caribbean cruises demanded and on the demand for Caribbean cruises?
The quantity of Caribbean cruises demanded decreases and the demand for Caribbean cruises is unchanged
Consider the market for coffee. Suppose the price of a cup of coffee falls. What is the effect of this event on the quantity of coffee demanded and on the demand for coffee?
The quantity of coffee demanded increases and the demand for coffee is unchanged.
The table shows the production possibilities of a small Pacific island economy. Can this economy produce 2 pounds of fish and 18 pounds of berries? Possibility Fish Berries (pounds) (pounds) A 0 and 20 B 1 and 18 C 2 and 15 D 3 and 11 E 4 and 6 F 5 and 0
This economy cannot produce 2 pounds of fish and 18 pounds of berries because this combination is outside its PPF.
The people of Leisure Island have 50 hours of labor a day that can be used to produce entertainment and good food. The table shows the maximum quantity of either entertainment or good food that Leisure Island can produce with different quantities of labor. What is the opportunity cost of producing an additional unit of entertainment? How does the opportunity cost of producing a unit of entertainment change as more entertainment is produced? Labor Entertainment (units) Good food (units) 0 0 or 0 10 40 or 120 20 80 or 200 30 120 or 240 40 160 or 260 50 200 or 268 When Leisure Island is producing on its PPF, the opportunity cost of producing a unit of entertainment _______ as more entertainment is produced.
When Leisure Island produces 40 units of entertainment and 200 units of food, the opportunity cost of producing an additional unit of entertainment is 0 units of food. When production is 80 units of entertainment and 240 units of food a day, the opportunity cost of producing another unit of entertainment is 1.0 units of food. When production is 120 units of entertainment and 200 units of food a day, the opportunity cost of producing another unit of entertainment is 2.0 units of food. increases
How do the following events influence U.S. production possibilities? If some retail workers in the United States are re-employed building dams and wind farms, _______. If more Americans take early retirement, _______. If a drought devastates California's economy, _______.
a movement along the U.S. PPF will occur the U.S. PPF will shift inward the U.S. PPF will shift inward
The people of Leisure Island have 50 hours of labor a day that can be used to produce entertainment and good food. The table shows the maximum quantity of either entertainment or good food that Leisure Island can produce with different quantities of labor. Is an output of 50 units of entertainment and 50 units of good food attainable and efficient? With a production of 50 units of entertainment and 50 units of good food, do the people of Leisure Island face a tradeoff? Labor Entertainment (units) Good food (units) 0 0 or 0 10 20 or 30 20 40 or 50 30 60 or 60 40 80 or 65 50 100 or 67 An output of 50 units of entertainment and 50 units of good food is ______. With production of 50 units of entertainment and 50 units of good food, the people of Leisure Island _______.
attainable and inefficient do not face a tradeoff
The table shows the production possibilities of a small Pacific island economy. If the island produces of 3 pounds of fish and 11 pounds of berries, why does it achieve production efficiency? If the island produces of 3 pounds of fish and 11 pounds of berries, it will achieve production efficiency because the economy _______. Possibility Fish Berries (pounds) (pounds) A 0 and 20 B 1 and 18 C 2 and 15 D 3 and 11 E 4and 6 F 5 and 0
cannot produce 4 pounds of fish without producing fewer berries
Why you can get a free college education in Germany but not in California Even American students can get a free college degree in Germany, where high taxes pay for colleges. Despite college being free, fewer students in Germany earn college degrees than in the United States and more enter vocational apprenticeships. Source: Los Angeles Times, October 29, 2015 If California adopted the German model of higher education, how would that change for whom goods and services are produced? If California adopted the German model of higher education, ______would get more and ______ would get less.
college graduates and skilled workers; taxpayers
El Nino takes toll on U.S. rice farmers Dry weather has delayed rice planting and harvests will be low. But wheat is enjoying a bumper crop. Source: The Guardian, September 27, 2015 Using the demand and supply model, explain how the prices of rice and wheat will change and how the markets for rice and wheat will influence each other. A poor rice harvest will _____ rice and ____ its price. A bumper wheat crop ____ wheat and ____ its price. The markets of wheat and rice influence each other because wheat and rice are______.
decrease the supply of; raise increases the supply of; lowers substitutes, so a higher price of rice will increase the demand for wheat
A farm grows soybean and produces chickens. The opportunity cost of producing each of these products increases as more of it is produced. Draw the farm's PPF. Label it PPF0. The farm adopts a new technology which allows it to use fewer resources to fatten chickens. Draw a PPF that illustrates the impact of the new technology. Label it PPF1. How is the opportunity cost of producing a bushel of soybean affected? With the new technology, the opportunity cost of producing a chicken _____ because _____ soybeans must be forgone to produce a chicken.
decreases: fewer
Economics studies choices that arise from one fact. What is that fact?
everyone has unsatified wants
How does an economy grow? Explain why economic growth is not free. An economy grows when it _______. Economic growth is not free because _______.
expands its production possibilities it uses resources that cannot be used to produce goods and services for consumption today
In the following three news items, find examples of the what, how, and for whom questions: "Consultants replacing high school counselors"; "American Airlines reaches deal with pilots"; "Asteroid mission canceled". The news headline "Consultants replacing high school counselors" deals with the ______ question(s) of economics. The news headline "American Airlines reaches deal with pilots" deals with the ______ question(s) of economics. The news headline "Asteroid mission canceled" deals with the ______ question(s) of economics.
how for whom what
GM, UAW reach crucial cost-cutting pact GM and the UAW agree on restructuring workers' jobs. This restructuring, with no change in the wage rate, will save GM billions in labor costs. Source: Wall Street Journal, May 22, 2009 Will this reduction of labor costs, with no change in the wage rate, change GM's supply of vehicles? The cut in labor costs with no change in the wage rate will ______.
increase productivity, which will increase GM's supply of vehicles
For consumers, hot dogs and burgers are substitutes. If the price of a hot dog increases, does the demand for burgers change? If the price of a hot dog increases, the demand for burgers will _______.
increase, and the demand curve for burgers will shift rightward
The graph shows the PPF of an economy that produces butter and ice cream. How does the opportunity cost of producing a pound of butter at point A differ from at point B? How does the opportunity cost of producing a tub of ice cream at point B differ from at point A? The opportunity cost of producing a pound of butter is ______ at point A than at point B. The opportunity cost of producing a tub of ice cream is ______ at point B than at point A.
less;less
In the market for smartphones, the price of a smartphone rises and other things remain the same. Show the effect in the graph. Draw either a new demand curve or an arrow along the curve showing the direction of change. When does the demand curve for smartphones shift rightward? The demand curve for smartphones shifts rightward when ______. When does the demand curve for smartphones shift leftward? The demand curve for smartphones shifts leftward when ______.
the price of a call from a smartphone falls or the price of a call from a land-line phone rises producers announce that smartphone prices will fall next month
If the price of a printer rises, with all other influences on buying plans remaining the same, does the demand for printers change or does the quantity of printers demanded change? If the price of a printer rises, with all other influences on buying plans remaining the same, _______.
the quantity of printers demanded decreases
In the market for sliced bread, the price of a loaf of sliced bread rises. What is the effect of this event on the quantity of sliced bread supplied and on the supply of sliced bread?
the quantity of sliced bread supplied increases and the supply of sliced bread is unchanged
Tony and Patty produce skis and snowboards. The tables show their production possibilities. Each week, Tony produces 4 snowboards and 8 skis and Patty produces 15 snowboards and 30 skis. Tony and Patty decide to specialize and trade. If Tony and Patty specialize and trade, what are the gains from trade? Tony's Production Possibilities Snowboards (per week) Skis (per week) 20 and 0 16 and 2 12 and 4 8 and 6 4 and 8 0 and 10 Patty's Production Possibilities Snowboards (per week) Skis (per week) 30 and 0 15 and 30 0 and 60
tony; 20 snowboards patty;60 skis
Cost of meeting 2021 vehicle emission standards Carbon dioxide emissions from cars must be cut from 130 grams to 95 grams per kilometer. To meet this new standard, the price of a car will rise by $1,350. Source: International Business Times, November 9, 2015 Calculate the opportunity cost of reducing the carbon emission level by 1 gram. The opportunity cost of reducing the emission level by 1 gram is ______.
$38.57 of other goods and services
In one hour, Sue can produce 70 caps or 21 jackets and Tessa can produce 50 caps or 25 jackets. Who has a comparative advantage in producing caps? If Sue and Tessa specialize and trade, who will gain? If Sue and Tessa specialize in producing the good in which they have a comparative advantage, ______.
Sue's opportunity cost of producing a cap is 0.3 jackets and Tessa's opportunity cost of producing a cap is 0.50 jackets. ______ has a comparative advantage in producing caps. sue;both Sue and Tessa gain
Tom and Abby produce rackets and balls. The graphs show their production possibilities. Tom uses all his resources and produces 2 rackets and 8 balls an hour. Abby uses all her resources and produces 2 rackets and 4 balls an hour. What is Tom's opportunity cost of producing a racket? What is Abby's opportunity cost of producing a racket? Who has a comparative advantage in producing balls? Who has a comparative advantage in producing rackets? In the production of balls, ______ and _____ has a comparative advantage. In the production of rackets, ______ and _____ has a comparative advantage.
Tom's opportunity cost of producing a racket is 4 balls. Abby's opportunity cost of producing a racket is 2 balls. Tom has a lower opportunity cost than Abby; Tom Abby has a lower opportunity cost than Tom; Abby
Tony and Patty produce skis and snowboards. The tables show their production possibilities. Each week, Tony produces 3 snowboards and 24 skis and Patty produces 6 snowboards and 3 skis. Who has a comparative advantage in producing snowboards? Who has a comparative advantage in producing skis? Patty has a comparative advantage in producing snowboards if_______. 18 3 and 24 0 and 30 Patty's Production Possibilities Snowboards (per week) Skis (per week) 12 and 0 6 and 3 0 and 6
Tony's opportunity cost of producing a snowboard is 2.02.0 skis. Patty's opportunity cost of producing a snowboard is 0.50.5 skis.
The people of Foodland have 40 hours of labor a day to bake pizza and bread. The table shows the maximum quantity of either pizza or bread that Foodland can bake with different quantities of labor. Can Foodland produce 30 pizzas and 30 loaves of bread a day? If it can, is this output efficient, do the people of Foodland face a tradeoff, and what is the opportunity cost of producing an additional pizza? Foodland _______ produce 30 pizzas and 30 loaves of bread a day. This output is _______. Foodland ______. The opportunity cost of producing an additional pizza is ______. Labor Pizzas Bread (loaves) 0 0 or 0 10 30 or 10 20 50 or 20 30 60 or 30 40 65 or 40
can; efficient faces a tradeoff; 0.5 loaf of bread
The demand for a good decreases by 10 percent and the supply of the good decreases by 8 percent. Does the price of the good rise or fall? Why? The price of the good _______ because _______.
falls; demand decreases by more than supply decreases and when demand decreases the price falls