Economics 101

Fall 2001

Answer Key to Practice Questions 1

1.a. N b. P c. N d. P

2.a. Slope : 3, -2

Intercept : 2, 1

X = -1/5, Y = 7/5

b. Slope : 2, -1/5

Intercept : 7, 2/5

X = -3, Y = 1

c. Slope : 1,-1/3

Intercept :5, –2/3

X = -17/2, Y = -7/2

3. a. y = 7/3 + 2/3x

b. y = -x - 3

c. y = 46/3 + (11/6)x

d. y = x

4. a. B is feasible and obtainable.

b. While C is infeasible and unobtainable.

c. At point A, the economy is fully utilizing its resources, while at point C the economy does not have sufficient resources to reach this level of production.

d. At point A, the economy produces its maximum output while at point B the economy has underemployed or unemployed resources and thus is not producing the maximum amount of the two goods possible.

e. As more and more of one good is produced, the opportunity cost of producing additional units of that good will increase.

5. a . 500 units of capital good production is the maximum

c. the slope is –2 if consumption goods are on the y-axis and –1/2 if capital goods are on the y-axis.

c. constant opportunity cost

d. 1/2 units of capital goods

6.

1. 2 sports
2. ½ food
3. 1 sports
4. 1 food
5. Sports, sports; Food, Food

7.

a. 15/4 units of bread

b. 4/15 units of fish

c. 4/3 units of bread

d. 3/4 units of fish

e. Mike

f. Mike

g. Fish, Bread