ECO 2013 - Fall 2020 - Homework Questions

Martin has given himself an entertainment budget of $5 per week. He has decided that each week we will spend that $5 by either

1

Each of the following topics could be studied in economics. Determine whether each topics are better categorized as microeconomics or macroeconomics. 1. The effect of an extension in unemployment benefits on the unemployment rate in the country. 2. The effect of a tax credit for purchasing new energy-compliant appliances on the use of electricity. 3. The effect of a harsh growing season on the price of corn. 4. The effect of an increase in the inflation rate on households' decision to save or spend money.

1. Macroeconomics 2. Microeconomics 3. Microeconomics 4. Macroeconomics

Use your knowledge of relative scarcity to rank the following items from the least scarce (at the top) to the most scarce (at the bottom). Drinking water, Salt water, Coal

1. Salt water 2. Coal 3. Drinking water

The quality of an economic model can be measured by:

1. Whether it gives us insight that can be used in the real world. 2. How well it reflects reality.

The process of assigning a good, a service, or a resource to one use instead of another describes "______"

Allocation

Allocating scarce resources

At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skate park and building an arboretum. This is known as the problem of:

_____ ability involves assuming risk and organizing resources into a productive process

Entrepreneurial

When someone compares marginal benefits associated with an activity to its marginal costs, that person is making a ____ decision.

Marginal (Marginal decision making is a subset of rational decision making)

Each row of the productions possibilities schedule illustrates the ____ (max/min) amount of a good or a service that may be produced, given the production of the other.

Maximum

Rational decision making is based on three assumptions:

Optimization, Marginal decision making, Self-interest

You are trying to decide which options packages you should buy for your new car. More options cost more money, but they also improve your driving experience. Given the marginal benefits and costs in the table, which option packages would optimize your purchase? Option MB MCA $1000 $650B $900 $700C $750 $750D $250 $800

Packages A,B and C

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called the _____ _____ ______.

Production possibility curve

Because the world is characterized by scarcity, people must allocate the limited _____ at their disposal among many competing uses.

Resources

A major problem faced by developing countries is the relative _____ of drinkable water as compared to water in general.

Scarcity

Marginal benefit is:

The additional benefit associated with one more unit of an activity.

Marginal cost is:

The additional cost associated with one more unit of an activity.

Evaluate the following statement: "I love ice cream. But I've eaten so much ice cream today, I can't possibly eat another cup."

The marginal benefit of eating ice cream is falling.

Terms of trade are:

The price of a good in terms of another