Problem 1
Match each term with the correct definition economics, opportunity cost, marginal analysis, utility. a. The next-best thing that must be forgone in order to produce one more unit of a given product. b. The pleasure, happiness, or satisfaction obtained from consuming a good or service. c. The social science concerned with how individuals, institutions, and society make optimal (best) choices under conditions of scarcity. d. Making choices based on comparing marginal benefits with marginal costs.
Problem 2
Indicate whether cach of the following statements applics to microeconomics or macroeconomics: a. The unemployment rate in the United States was 8.1 percent in August 2012 b. A U.S. software firm discharged 15 workers last month and transferred the work to India. c. An unexpected freexe in central Florida reduced the citrus crop and caused the price of oranges to rise. d. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009 e. Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point. f. The consumer price index rose by 3.8 percent from August 2011 to August 2012
Problem 3
Suppose that you initially have \(\$ 100\) to spend on books or movic tickets. The books start off costing \(\$ 25\) cach and the movic tickets start off costing \(\$ 10\) cach. For cach of the following situations, would the attainable set of combinations that you can afford increase or decrease? a. Your budget increases from \(\$ 100\) to \(\$ 150\) while the prices stay the same. b. Your budget remains \(\$ 100,\) the price of books remains S25, but the price of movie tickets rises to S20. c. Your budget remains \(S 100,\) the price of movie tickets remains \(\$ 10,\) but the price of a book falls to \(\$ 15\).
Problem 4
Suppose that you are given a \(\$ 100\) budget at work that can be spent only on two items: staplers and pens. If staplers cost \(\$ 10\) each and pens cost \(\$ 2.50\) each, then the opportunity cost of purchasing one stapler is: a. 10 pens. b. 5 pens. c. zero pens. d. 4 pens.
Problem 5
For each of the following situations involving marginal cost (MC) and marginal
bencfit (MB), indicate whether it would be best to produce more, fewer, or the
current number of units.
a. 3,000 units at which \(\mathrm{MC}=\mathrm{S} 10\) and
\(\mathrm{MB}=\mathrm{S} 13\)
b. 11 units at which \(M C=S 4\) and \(M B=S 3\)
c. 43,277 units at which \(\mathrm{MC}=\$ 99\) and \(\mathrm{MB}=\$ 99\)
d. 82 units at which \(M C
Problem 6
Explain how (if at all) each of the following events affects the location of a country's production possibilities curve: a. The quality of education increases. b. The number of unemployed workers increases. c. A new technique improves the efficiency of extracting copper from ore. d. A devastating earthquake destroys numerous production facilitics.
Problem 7
What are the two major ways in which an economy can grow and push out its production possibilitics curve? a. Better weather and nicer cars. b. Higher taxes and lower spending. c. Increases in resource supplics and advances in technology. d. Decreases in scarcity and advances in auditing.
