Economics 102Student
Name:
Spring 2000ID#:
Homework #1TA
Name:
Due 2/7/00Day/Time
of Section:
Note:If asked
to graph, use ¼ inch graph paper.Make
sure all submitted papers have your name on them and are stapled together.Please
Xerox your homework before submitting it.If
you claim we have lost your homework, we will require you to show us the
Xeroxed copy of your work for proof that you did submit it to us.
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(Each response if worth one point.) Identify
whether or not the following statements are normative (N) or positive (P).
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Tax cuts are always good for the economy. _________
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The Republican plan for the economy sounds like a better plan than the
Democratic plan for the economy. _____________
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A tax cut will result in households having more income to spend on goods
and services. ___________
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(Each item is worth a total of two points.) On
a separate sheet of graph paper graph the following sets of equations. Each
set of equations should be on its own graph and each graph should have
the x and y axis labeled, the solution for the two equations identified
(i.e., what value of x and y will satisfy both equations) as xe and
ye.
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y = 4x + 10
y = -5x + 2
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y = 2x + 2
y = -2x + 8
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x = 6y + 15
x = -2y + 5
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x = 2y + 4
x = -3y + 14
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(Each item is worth one point.) Solve
the sets of equations given in problem 2 algebraically. Make
sure you show all your work (i.e., do not plug the equations into a calculator
to solve).
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(Each blank is worth one point.) You
are given the following information sets and are asked to find the slope,
the y-intercept, and the equation for each set of information.
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Two sets of (X, Y) points that satisfy this equation are (2,4) and (6,8)
i.Slope
= _________
ii.Y-intercept
= __________
iii.Equation:________________
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Two sets of (X, Y) points that satisfy this equation are (5, 10) and (-10,
0)
i.Slope
= __________
ii.Y-intercept
= _____________
iii.Equation:
______________
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(Each answer is worth one point.) Answer
the following questions using the figure given below.
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Which points are feasible and obtainable for the economy represented in
the above graph?_______________
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Which points are infeasible and unobtainable for the economy represented
in the above graph? _______________
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Which points are efficient points for the economy represented in the above
graph? _____________
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Does this graph illustrate increasing opportunity cost, decreasing opportunity
cost or constant opportunity cost? _________
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(Answers a, and b are worth one point each and answer c is worth two points.) Use
the following table to answer this question.
Macroland
Production
of consumerProduction
of capital
Goods
in 2000Goods
in 2000
1000
units0
units
800
units100
units
600
units200
units
200
units400
units
Assume that this table gives
the general relationship between the production of capital and consumer
goods in Macroland for the year 2000.There
are other feasible points on the PPF of Macroland and the table only gives
several points that are possible.
a.What
is the maximum amount of capital good production possible in the year 2000
in Macroland? __________
b.What
is the slope of the PPF represented in the above table? __________
c.If
growth is your primary objective, explain where you think this economy
should produce and what tradeoffs this choice might represent for this
economy. ________________________________________________
____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
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(Answers a, b, c, and d are worth one point and answer e is worth two points.) This
question is one about absolute and comparative advantage. We
will simplify the problem by assuming that both individuals face linear
production possibility frontiers and thus have constant opportunity cost
with regard to the production of the goods that we will be discussing (note
that constant does not mean equivalent opportunity cost).
Suppose that there are
two individuals in Macroland and each of them can produce either food or
entertainment.Assume that the opportunity
cost is constant along the PPF.
BobSue
FoodEntertainmentFoodEntertainment
20603060
50455040
a.What
is Bob’s opportunity cost for one more unit of entertainment? _____________
b.What
is Bob’s opportunity cost for one more unit of food? _______
c.What
is Sue’s opportunity cost for one more unit of entertainment? _________
d.What
is Sue’s opportunity cost for one more unit of food? ________
e.In
order to achieve the highest level of production, Sue should specialize
in producing _________ while Bob specializes in producing _____________.
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(Each answer is worth one point each.) Judy
can produce 2 fish in 3 hours or 5 loaves of bread in 2 hours. Mike
can produce 3 fish in 4 hours and 3 loaves of bread in 3 hours. Currently,
Judy is producing 8 fish and 30 loaves of bread while Mike is producing
9 fish and 12 loaves of bread. Judy
and Mike are not trading initially. Assume
that Judy and Mike both have 24 hours a day that they can work (i.e., they
don’t need to sleep).
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What is the opportunity cost of producing one more fish for Judy? __________
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What is the opportunity cost of producing one more fish for Mike? _________________
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In a single day of 24 hours, who has the absolute advantage in producing
fish? _______________________
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Mike should specialize in producing ___________ while Judy specializes
in producing ______________
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If Mike and Judy both specialize, the maximum amount of fish that can be
produced is ____________ and the maximum amount of bread that can be produced
is ___________________.