Answer the following questions.
Explain your thinking to demonstrate your understanding of economic terms and concepts relevant to your answer.
Write full sentences and use double spacing between paragraphs.
a) A production possibilities table for two products, corn and paper, is found below. Usual assumptions regarding production possibilities are implied. Corn is measured in tons, and paper is measured per unit.
|
Combination
|
Corn
|
Paper
|
|
A
|
0
|
6
|
|
B
|
18
|
5
|
|
C
|
33
|
4
|
|
D
|
45
|
3
|
|
E
|
54
|
2
|
|
FF
|
60
|
1
|
|
G
|
62
|
0
|
Calculate numbers that illustrate increasing opportunity cost in the production of paper.
b) Personal computers are becoming less expensive as new technology reduces the cost of production. In a supply and demand model, explain the effects of the technological innovations and their effect on the quantity of computers in the market.
c) "The internet is non rival, which means it is a public good". Do you agree or disagree? Explain.
d) Explain in detail how a decrease in consumer demand for a product will result in less of the product being produced and in fewer resources being allocated to its production.
e) What effect should each of the following have upon the demand for portable music players in a competitive market? Explain your reasoning in each case.
(i) an increase in population and incomes
(ii) consumer expectations of substantial price increases in music players
f) Given the products below and the events that affect them, indicate what happens to demand or supply, and the equilibrium price and quantity in a competitive market. Identify the determinant of demand or supply that causes the shift.
(i) Computers. Parts for making computers fall in price because of improvements in technology.
(ii) Chicken. Beef prices rise because severe winter weather reduces cattle herds.
g) Discuss one of the ingredients of growth pertinent to today's economy.
h) Explain why a producer who is causing external costs does not have the incentive to reduce these costs.
I) Net investment spending on capital goods can be positive, negative, or zero, but gross investment can never be less than zero. Explain.
j) Some stores give "free" products to consumer. An economist would say the products are not free. Why the difference?
k) Give two examples of investment spending that can increase the future production capacity of the economy:
(i) by business firms and
(ii) by government
L) The following is a list of figures for a given year in billions of dollars. Using this data, compute: (a) GDP; (b) NDP; (c) Net exports.
|
|
Billions
of dollars
|
|
Transfer payments
|
$ 16
|
|
Government purchases
|
70
|
|
Personal taxes
|
38
|
|
Corporate income taxes
|
28
|
|
Taxes on production and imports
|
15
|
|
Social Security contributions
|
8
|
|
Undistributed corporate profits
|
19
|
|
Proprietors' income
|
25
|
|
Compensation of employees
|
258
|
|
Personal consumption expenditures
|
300
|
|
Consumption of fixed capital
|
6
|
|
Rents
|
10
|
|
U.S. Exports
|
26
|
|
Corporate profits
|
70
|
|
Interest
|
12
|
|
Dividends
|
23
|
|
Imports to U.S.
|
155
|
|
Gross private domestic investment
|
66
|
|
Net foreign factor income
|
10
|
|
Statistical discrepancy
|
35
|
M) Suppose an economy's real GDP is $50,000 in year 1 and $55,000 in year 2.
(i) Calculate the growth rate of real GDP per capita if population was 100 in year 1 and 101 in year 2.
(i) What is the most recent growth rate in real GDP reported in the news or economic statistics of the U.S.