ECON 102- Problem Solving: Thinking Like an Economist

Which of the elements of this scenario represent a flow from a household to a firm? This could be a flow of dollars, inputs, or outputs. Check all that apply.

- The $200 Jake spends to purchase air travel to Hawaii from Flyaway Airlines -Latasha's labor

Suppose Tim is currently using combination D, producing one truck per day. His opportunity cost of producing a second truck per day is ____ balls Correct per day.

3 Balls

Now, suppose Tim is currently using combination C, producing two trucks per day. His opportunity cost of producing a third truck per day is ____ balls Correct per day.

4 Balls

Suppose an economist believes that the price level in the economy is directly related to the money supply, or the amount of money circulating in the economy. The economist proposes the following relationship: P=A×M • P=Price Level • M=Money Supply • A=A composite of other factors, including real GDP, that change very slowly over time. How might an economist gather empirical data to test the proposed relationship between money and the price level?

An economist would look for data on past changes in the money supply, and note the resulting changes in the price level

Tim is a skilled toy maker who is able to produce both trucks and balls. He has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of his time. On the following graph, use the blue points (circle symbol) to plot Tim's initial production possibilities frontier (PPF).

Blue graph points: (0,19) (1,18) (2,15) (3,11) (4,0) Green graph points: (0,19) (2,18) (4,15) (6,11) (8,0)

Suppose Canada produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for corn, an agricultural good, and construction vehicles, a capital good. Drag the production possibilities frontier (PPF) on the graph to show the effects of a breakout of avian flu that sickens millions of workers. Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.

Drag the PPF graph down, it should go from 120 to 80 ( CORN in Millions of Bushels)

Suppose Latasha earns $625 per week working as work as a flight attendant for Flyaway Airlines. She uses $8 to buy a box of aspirin at Pillmart Pharmacy. Pillmart Pharmacy pays Jake $325 per week to work the cash register. Jake uses $200 to purchase air travel to Hawaii from Flyaway Airlines.

Factor Market: -Jake earns $325 per week working for Pillmart Pharmacy. Product Market: -Jake spends $200 to purchase air travel to Hawaii from Flyaway Airlines. -Latasha spends $8 to buy a box of aspirin.

Suppose that Jake, an economist from a university in Arizona, and Latasha, an economist from a university in Massachusetts, are arguing over government intervention. The following dialogue shows an excerpt from their debate: Latasha: The usefulness of government intervention in the economy is a long-standing issue that economists continue to debate. Jake: I feel that government involvement in the economy should be reduced because government programs cause more harm than good. Latasha: While I do agree that government programs can be inefficient, I really think they are necessary to help the less fortunate. The disagreement between these economists is most likely due to ___________.

Fill in the blank answer: -Differences in values.

The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. *circular flow model should be here but couldn't find an image to add* Based on this model, households earn income when ____ Correct purchase ____ Correct in factor markets.

Firms, Factors

Because he can now make more trucks per hour, Tim's opportunity cost of producing balls is ____ than Correct it was previously.

Higher than

From the previous analysis, you can determine that as Tim increases his production of trucks, his opportunity cost of producing one more truck _______ .

Increases

Suppose South Africa produces only two goods: corn and laptops. The following graph shows South Africa's current production possibilities frontier, along with six output combinations represented by black points (plus symbols) labeled A to F. Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, or unattainable. Check all that apply.

Inefficient: C, D Efficient: E, F Unattainable: A, B

Determine whether each of the following topics would more likely be studied in microeconomics or macroeconomics.

Microeconomics: -The effect of government regulation on a monopolist's production decisions Macroeconomics: - The optimal interest rate for the Federal Reserve to target -The government's decision on how much to spend on public projects

The following table contains statements that provide some analysis of policies that address globalization. Categorize each of these statements as either positive or normative.

Positive: -In the past decade, U.S. companies have outsourced millions of jobs overseas. -If the U.S. government were to institute higher tariffs on imports, companies would stop outsourcing jobs. Normative: -Companies that outsource jobs are acting immorally. -The U.S. government should institute higher tariffs on imports.

Despite their differences, with which proposition are two economists chosen at random most likely to agree?

Rent ceilings reduce the quantity and quality of available housing.