Assignment -
1. Scarcity, trade-offs, and opportunity cost
If you buy a ticket to an outdoor concert but come down with a bad cold on the night of the show, the principle of _______ suggests you should not consider the money you already spent on the ticket when deciding whether or not to go.
2. Who has the lowest opportunity cost?
Ginny and Eric need to decide which one of them will take time off from work to complete the rather urgent task of pruning their trees. Ginny is pretty good with a pole saw; she can prune the trees in 30 minutes. Eric is somewhat slow; it takes him 5 hours to prune the trees. Ginny earns $120 per hour as a lawyer, while Eric earns $25 per hour as a barber.
Keeping in mind that either Ginny or Eric must take time off from work to prune the trees, who has the lower opportunity cost of completing the task?
Eric
Ginny
Ginny and Eric face identical opportunity costs
3. Sunk costs and decision making
Lorenzo has plans to go to an opera and already has a $100 nonrefundable, non-exchangeable, and nontransferable ticket. Now Neha, whom Lorenzo has wanted to date for a long time, asks him to a party. Lorenzo would prefer to go to the party with Neha and forgo the opera, but he doesn't want to waste the $100 he spent on the opera ticket.
From the perspective of an economist, if Lorenzo decides to go to the opera, what has he just done?
Correctly ignored a sunk cost
Incorrectly allowed a sunk cost to influence his decision
Made an optimal choice
4. Comparative advantage
Ginny and Jim are partners at a management consulting firm. They are trying to determine which of them has a comparative advantage in creating the 100 slides required for a sales pitch to a prospective client.
Ginny can create 25 slides per hour. For other activities, she can bill clients $500 per hour. Ginny's opportunity cost of creating slides is _______ per slide.
Jim's opportunity cost of creating slides is 25% higher than Ginny's. However, as the junior partner, his billing rate is 20% lower. Based on all of these facts, _______ has a comparative advantage in creating slides.
5. Comparative and absolute advantage
Carlos and Deborah are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of alfalfa and barley each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing alfalfa or barley or to produce alfalfa on some of the land and barley on the rest.
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Alfalfa (Bushels per acre)
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Barley (Bushels per acre)
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Carlos
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20
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4
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Deborah
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28
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7
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On the following graph (attached), use the blue line (circle symbol) to plot Carlos's production possibilities curve (PPF), and use the purple line (diamond symbol) to plot Deborah's PPF.
Carlos's opportunity cost of producing 1 bushel of barley is _______ bushels of alfalfa, whereas Deborah's opportunity cost of producing 1 bushel of barley is _______ bushels of alfalfa. Because Carlos has a _______ opportunity cost of producing barley than Deborah, _______ has a comparative advantage in the production of barley, and _______ has a comparative advantage in the production of alfalfa.
6. Efficiency in the production possibilities model
Suppose Brazil produces only two goods: wheat and laptops. The following graph (in attached file) shows Brazil's current production possibilities frontier, along with six output combinations represented by black points (plus symbols) labeled A to F.
Complete the following table by indicating whether each point represents output combinations that are inefficient, efficient, feasible, or infeasible. Check all that apply.
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Point
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Inefficient
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Efficient
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Feasible
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Infeasible
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A
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B
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C
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D
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E
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F
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7. Specialization and production possibilities
Suppose Argentina produces only trucks and cars. The resources that are used in the production of these two goods are not specialized-that is, the same set of resources is equally useful in producing both cars and trucks.
The shape of Argentina's production possibilities frontier (PPF) should reflect the fact that as Argentina produces more cars and fewer trucks, the opportunity cost of producing each additional car ______.
The following graphs (in attached file) show two possible PPFs for Argentina's economy: a straight-line PPF (PPF1) and a bowed-out PPF (PPF2).
Based on the previous description, the tradeoff Argentina faces between producing cars and trucks is best represented by ______.
8. Shifts in production possibilities
Suppose the Netherlands produces two types of goods: agricultural and capital. The following diagram shows its current production possibilities frontier for alfalfa, an agricultural good, and locomotives, a capital good.
Drag the production possibilities frontier OW) on the graph to show the effects of a long drought that reduces the amount of water available for farmers to use for irrigation.
Note: Select either end of the curve on the graph to make the endpoints appear. Then drag one or both endpoints to the desired position. Points will snap into position, so if you try to move a point and it snaps back to its original position, just drag it a little farther.
9. Economic systems
In a market system:
Resources are directed and production is coordinated by the government
Some markets are regulated, while others are unregulated
Households and firms make all economic decisions with minimal government regulation
Consumption and production possibilities are restricted by religious authorities
10. Strengths and weaknesses of the three basic types of economies
Imagine you are a consultant who has been asked to summarize the strengths and weaknesses of Customaria, a nation with a pure traditional economy (an economy molded largely by custom or religion).
Which of the following would you include in your report as weaknesses of Customaria's economy? Check all that apply.
People express more dissatisfaction with their lives than those in other economies.
Wealth does not get redistributed to the needy.
There is little cooperation, relative to other economies.
Occupational choices can be restricted.
Attachment:- Assignment File.rar