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 each of the following statements applies to microeconomics or macroeconomics: a. The unemployment rate in the United States was 5.1 percent in September 2015 b. A U.S. software firm discharged 15 workers last month and transferred the work to India. c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise. d. U.S. output, adjusted for inflation, increased by 2.4 percent in 2014 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 0.2 percent from August 2014 to August 2015.
Problem 3
Suppose that you initially have 100 dollar to spend on books or movie tickets. The books start off costing 25 dollar each and the movie tickets start off costing 10 dollar each. For each 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 dollar while the prices stay the same. b. Your budget remains 100 dollar, the price of books remains 25 dollar but the price of movie tickets rises to 20 dollar c. Your budget remains 100 dollar, the price of movie tickets remains 10 dollar, but the price of a book falls to 15 dollar
Problem 4
Suppose that you are given a 100 dollar budget at work that can be spent only on two items: staplers and pens. If staplers cost 10 dollar each and pens cost 2.50 dollar 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 benefit (MB), indicate whether it would be best to produce more, fewer, or the current number of units. LO1.4 a. 3,000 units at which \(\mathrm{MC}= 10\)dollar and \(\mathrm{MB}= 13\)dollar b. 11 units at which \(\mathrm{MC}= 4\)dollar and \(\mathrm{MB}= 3\)dollar c. 43,277 units at which \(\mathrm{MC}= 99\)dollar and \(\mathrm{MB}= 99\)dollar d. 82 units at which \(\mathrm{MC}<\mathrm{MB}\). e. 5 units at which \(\mathrm{MB}<\mathrm{MC}\).
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 facilities.
Problem 7
What are the two major ways in which an economy can grow and push out its production possibilities curve? a. Better weather and nicer cars. b. Higher taxes and lower spending. c. Increases in resource supplies and advances in technology. d. Decreases in scarcity and advances in auditing.
