EC 111 Achieve Chapter 8

You are a director at a game studio. The CEO emails you asking for the most accurate chances of an upcoming game making its release date. You decide to set up a predictions market and have all employees working on the game buy shares in the market. If the price of a share is $0.30, the employees collectively believe that there is a ____ chance of releasing the game on time.

30%

The price of soybean futures has increased over the last three months. As a soybean equipment supplier, how should you respond? A higher futures price indicates that farmers expect to be able to sell soybeans at ____ price in the future. You should _____ the amount of soybean farming equipment you plan on supplying to the market.

a higher increase

You manage a farm equipment supply store in Iowa. Use the price of soybean futures as a signal, an incentive, and as a source of information to help make better business decisions by answering the following questions. Soybean futures are a. contracts where a buyer agrees to purchase soybeans at a specific time in the future. b. loans that buyers take out in order to buy soybeans at a low price, hold them for a short time, and sell them at a higher price to pay back their initial loan while still earing a profit. c. investments into soybean farms where farmers pay a dividend to investors who whole soybean futures.

a. contracts where a buyer agrees to purchase soybeans at a specific time in the future

Which transaction fails to produce gains from trade for both buyers and sellers? a. Charlene's job requires her to work on an oil rig, and she must alternate two weeks on the rig and two weeks off. When she is on the rig, she rents out her apartment through Airbnb. b. Elijah decides that his family should eat more healthy meals, but they are very pressed for time. He decides to subscribe to a service that sends healthy pre-planned meals to his home three times a week. c. Callie turns down an extra shift at work to take care of household chores. d. Neighbors Jordan and Chelsea are both working parents. They can hire a single babysitter to care for both of their toddlers for 75 percent of what they would collectively have to pay two separate babysitters.

c. Callie turns down an extra shift at work to take care of household chores.

The emergence of ride sharing apps like Lyft and Uber have created gains from trade by a. pushing traditional taxi companies and drivers out of the market. b. introducing new sellers into the market for taxi services and decreasing the price of rides. c. introducing new buyers into the market for taxi services and increasing the price of rides. d. requiring all of their drivers to have a valid driver's license and a clean driving history.

c. introducing new buyers into the market for taxi services and increasing the price of rides

Suppose that Verania and Josimar are roommates that need to complete some household chores. Vacuuming and washing dishes need to be done. They know from the last time they did these chores that it takes Verania 2 hours to vacuum and 1 hour to wash dishes. It takes Josimar 3 hours to vacuum and 2 hours to wash dishes. Josimar says it does not matter which task each of them performs because Verania is faster at both tasks. Josimar's reasoning a. is correct. Because Verania is faster at both tasks, there is no benefit in each volunteer specializing in one task or the other. b. is wrong. Because Josimar has a comparative advantage in washing dishes, he should wash dishes, and Verania should vacuum. c. is wrong. Because Verania has a comparative advantage in washing dishes, she should wash dishes, and Josimar should vacuum. d. is wrong. Because Verania has an absolute advantage in both tasks, she should perform both tasks herself.

c. is wrong. Because Verania has a comparative advantage in washing dishes, she should wash dishes, and Josimar should vacuum.

Many commodities have futures markets associated with them. A futures market is a prediction market that aggregates information based on uncertain events that may impact the market, and buyers commit to a financial contract in which they obligate themselves to purchasing a fixed quantity of the asset at a specified price on a certain date. In April, 2019, the national average price of unleaded gasoline was $2.87 per gallon. At the same time, the futures price for a June contract on unleaded gasoline was $2.07 per gallon. The forecasted price in the futures market suggests that unleaded gasoline prices will ____by June of 2019.

decline

Some people enjoy gardening and will grow their own vegetables, fruits, and herbs in their own backyard or in a leased plot. Many people agree that fresh fruits and vegetables taste better and, in some cases, are relatively cheap to grow. What are some reasons that not everyone grows their own vegetable garden? a. Some people would rather spend time engaging in other hobbies. b. Some people do not have the space or the willingness or means to rent space to grow a garden. c. Some people prefer to go to the grocery store and find everything they need in one spot. d. Some people do not have time to tend to garden chores like weeding, watering, fertilizing, etc. e. All of the above

e. All of the above

Over the last several decades the number of manufacturing jobs have decreased in the US and have increased in other countries such as Mexico. The US exports goods to Mexico. Most exports are agriculture products like corn, soybeans, and dairy, but exports also include intellectual property. This information suggests that Mexico has a _____ opportunity cost of manufacturing goods relative to the US. The US must have a _________ in producing ___________.

lower comparative advantage both agricultural products and computer software

You are now an RN at the hospital. Some of the tasks between a CNA and RN overlap but you should delegate some tasks to CNAs because they have a lower ________ of completing the tasks. Your _____ allows you to take on more complex tasks

opportunity cost, specialization

Over a six-month period in 2007 the price of corn increased by almost 70% as a result of increased demand for ethanol biofuel. As a result of the price increase in corn the _____ of corn will _____. At the same time the amount of acreage used in corn production will _____.

quantity supplied increase increase

Large airlines sometimes engage in fuel hedging as a way to avoid wild changes in jet fuel prices. To fuel hedge, an airline purchases a futures contract from an oil company that states they will purchase a set quantity of jet fuel at a specific price in the future regardless of what the actual market price is in the future. The value of the hedge will ____ when the price of jet fuel is higher. This is because there is more benefit for a company to protect from _____ by locking in a low price now if the expectation is that jet fuel will be higher in the future.

rise rising costs