Econ 201 - Billy Lemus Chapter 1-3 HW

Match the economic system with the correct description. 1. North Korea is a country ruled by the dictator Kim Jong‑un. All resources in the economy are owned by the state and allocated based on his wishes. 2. Australia's economy is marked by the private ownership of resources, along with prices directing their allocation. 3. The economy of a small village in the Amazon rain forest is based on past methods of production and tradition.

1. Command economy 2. Market economy 3. Traditional economy

Consider the table below. Assuming the law of demand holds, the cell labeled "?" could be which of the following quantities?

157

The graph shows the market for milk when the government imposes a price floor of $5. Fill in the blanks with the correct terms and numbers up to two decimal places. After the price floor is in place, how many units of milk are bought or sold? Units of milk: ______ The market does not clear after the price floor is imposed. Rather, there is a ______ of how many gallons? _______ gallons.

2.93 Gal Surplus 3.66

Mauricio has a circus act, and he has a budget of $720 to spend on monkeys and unicycles. The cost of a unicycle is $120, and the cost of a monkey is $90. Please graph Mauricio's budget constraint on the graph.

A on 6 B on 8

Economics is the study of how individuals choose to use scarce resources to fulfill their unlimited wants. Decisions require information. Advancements in technology have increased the speed at which information is spread. Choose the answer that describes the impact increased access to information has on an individual's ability to allocate scarce resources.

Access to greater amounts of information increases an individual's ability to efficiently allocate scarce resources.

Determine which individuals face scarcity and which do not.

All of the above.

Which of the following is the best definition of the opportunity cost of a decision?

Benefits from the best foregone alternative.

What key economic concept is the graph demonstrating?

Economics of scale

Determine how the equilibrium price and equilibrium quantity in the market for coffee changes if the price of tea, a substitute for coffee, decreases, and due to better weather, the price of coffee beans also decreases.

Equilibrium Price: decreases Equilibrium quantity: may increase, decrease, or stay the same

Why is there no such thing as a completely "free" market? Which of the following can result from overly burdensome regulations on markets?

Every market is subject to the restrictions imposed by those who have the authority to do so. Underground economies that operate outside of the law.

Sort the following items into boxes based on whether they are examples of monetary or fiscal policy.

Fiscal Policy: Increased taxes Decreased taxes Increased education spending Cut infrastructure spending Construct monuments like Mt. Rushmore

They all know you are taking economics and ask your advice. What would you say to them?

Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Why is this restriction so useful in economic analysis?

If every variable is allowed to change, it would be impossible to isolate the impact of one variable on another.

Assume that all dodge balls are made of rubber and there are no close substitutes. The competitive equilibrium price The competitive equilibrium quantity

Increases Changes ambiguously

When the market price of a good increases, the amount that sellers are willing to offer for sale increases. Economists call this

Law of Supply

Assume that you buy non-refundable tickets to a baseball game for $40. After the 3rd inning, your team is losing 20-0, and you are no longer enjoying the game. You realize that if you left the game, you could go to work early and pickup an extra $25. Should you leave or stay at the game?

Leave and work

Consider the maximum amount of a product that sellers are willing and able to provide for sale over a relevant range of prices, holding all other factors constant. Economists call this

Supply

An economic theory seeks to explain and predict real‑world outcomes, often within the context of a formalized mathematical model. Which statement is a major reason why such a theory may not be successful in this pursuit?

The model's assumptions are unrealistic and do not adequately describe how agents behave in the real world.

Let's say that you are in the market to purchase an already built house. Sort the items below into the correct bin based on whether the statement reflects something you need to know in order to purchase a house.

Things you need to know: Monthly income, expenses, savings Price of the home

Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?

Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

Which of the following questions would be studied in the area of microeconomics?

What determines the number of hours an individual works?

Ceteris Paribus

Which phrase do we use to indicate that we are trying to study the relationship between two variables while the values of all other variables are held unchanged?

Andrew's demand for Starbucks coffee changed as a result of

a change in income. inferior good normal good

Identify whether the given items are examples of imports, exports, or neither. Assume the United States is considered the domestic country. a. Heath lives in the United States and purchases a video game produced in Japan. b. Tanesha lives in Tennessee and buys an orange grown in Florida. c. A Chinese consumer purchases a television produced in China. d. A farmer in Iowa sells corn to a food processing plant in China. e. Exxon Mobil drills for oil in the United States and sells this oil to refineries in Brazil and Mexico.

a. import b. neither c. neither d. export e. export

Each scenario illustrates a principle of economics. Classify each scenario according to the principle that best fits it. a. An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. The company compares how much adding another worker will improve the product to the additional cost. b. Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time. c. On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store or a flat screen TV at another store, and buying one means losing out on the ability to purchase the other.

a. marginal decision b. resource scarcity c. opportunity cost

Determine if the statements are true or false. a. Along a particular budget line, the prices faced by the consumer and the consumer's income are held constant. b. The budget line shows possible production bundles. c. Judi has $50 to spend. If movies cost $8 and books cost $5, Judi can purchase five movies and three books. d. A budget line slopes downward because, to buy more of Good 1, a consumer has to buy less of Good 2. e. The budget line depicts the combinations of two goods a consumer can buy given her income and the current prices.

a. true b. false c. false d. true e. true

From an economic context, select the correct definition of a market. Select all examples of a market.

an institution that brings together buyers and sellers of goods or services all of the above.

The law of demand says that

as the price of a good increases, buyers are willing and able to purchase less.

For which of the following decisions is marginal analysis least beneficial?

deciding which college to attend

The law of diminishing marginal utility means that that as person receives more of a good, the added utility from each additional unit

decreases.

The price that results when quantity demanded equals quantity supplied is most correctly called the

equilibrium price.

The opportunity cost of one ton of steel in Germany is The opportunity cost of one ton of steel in South Korea is Which country has a comparative advantage in steel production?

one-quarter of PC one-half of PC Germany

In a competitive market, all of the choices along the production possibility frontier display ________________ efficiency, while the specific choice on the frontier that society picks is the one with _______________ efficiency.

productive, allocative

Normative Statements

say something about how the world ought to be.

Positive Statements

say something that describes how the world currently is.

Select the correct definition of the term "comparative advantage." When trading with more developed countries,

the ability to produce a good or service at a lower opportunity cost than another less developed countries have a comparative advantage in the production of some goods or services.

Fiscal policy is conducted by __________and involves __________.

the federal government; government spending & taxes

Daniel is a baker who has decided to create his own brand of chain restaurants, Short and Sweet. He negotiates with three suppliers for weeks and ultimately signs contracts with these suppliers. Daniel's situation with his suppliers is an example of

the invisible hand.

The law of supply explains

the positive relationship between price and quantity supplied.

Demand is best described as

the quantity of a good or a service that people are willing and able to purchase at different possible prices.

Utility is the measure of

the relative satisfaction, enjoyment, or contentment a person receives from consuming a good or service.

A surplus exists

when quantity supplied exceeds quantity demanded.