ECON 2113: Microeconomic (L5 and L10)

Assignment 1 (Chapter 1 and Chapter 2)

Due: 11:45pm on September 27, 2022
Instructions:
 Please upload your answers on Canvas by 11:45pm, September 27 (Tuesday).
 Late submissions will not be accepted.
 Please put your name and student ID at the upper right corner of the first page.

Part 1: Multiple Choice Questions (Please choose the best answer)

1. Economics is best defined as the study of how people, businesses, governments, and societies
A) choose abundance over scarcity.
B) make choices to cope with scarcity.
C) use their infinite resources.
D) attain wealth.

2. Scarcity is a situation in which

A) people cannot satisfy all their wants.
B) most people can get only bare necessities.
C) people can satisfy all their wants.
D) some people can get all they want and some cannot.

3.Which of the following is a microeconomic topic?

A) how a trade agreement between the United States and Mexico affects both nations'
unemployment rates
B) comparing inflation rates across countries
C) how rent ceilings impact the supply of apartments
D) how a tax rate increase will impact total production

4. Which of the following are considered factors of production used to produce goods and
services?
I. Land
II. Labor
III. Capital
IV. Entrepreneurship
A) I and II only
B) I and III only
C) I, II and III only
D) I, II, III and IV

5. An outcome is considered efficient if

A) it is not possible to make someone better off without making anyone else worse off.
B) it is the best available choice for an individual.
C) it results in fair shares for everyone involved.
D) it is possible to make someone better off without making anyone else worse off.

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6. On Saturday morning, you rank your choices for activities in the following order: go to the
library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to
go to the library. Your opportunity cost is
A) working out at the gym, having breakfast with friends, and sleeping late.
B) working out at the gym.
C) zero because you do not have to pay money to use the library.
D) not clear because not enough information is given.

7. Fred and Ann are both given free tickets to see a movie. Both decide to see the same movie.
We know that
A) both bear an opportunity cost of seeing the movie because they could have done other things
instead of seeing the movie.
B) both bear the same opportunity cost of seeing the movie because they are doing the same
thing.
C) it is not possible to calculate the opportunity cost of seeing the movie because the tickets were
free.
D) the opportunity cost of seeing the movie is zero because the tickets were free.

8. After you graduate, you have decided to accept a position working at the Bureau of Labor
Statistics for $45,000.00 a year. The two other offers you received were working for Wal-Mart
for $38,000 and working for Ernst and Young consulting for $42,000. Of these two offers, you
would have preferred the job at Ernst and Young. What is the opportunity cost of accepting the
position at the Bureau of Labor Statistics?
A) the $45,000 you are paid for working at the Bureau of Labor Statistics
B) the $42,000 you would have been paid working for Ernst and Young
C) the $38,000 you would have been paid working for Wal-Mart
D) the $42,000 you would have been paid working for Ernst and Young and the $38,000 you
would have been paid working for Wal-Mart

9. Laura is a manager for HP. When Laura must decide whether to produce a few additional
printers, she is choosing at the margin when she compares
A) the total revenue from sales of printers to the total cost of producing all the printers.
B) the extra revenue from selling a few additional printers to the extra costs of producing the
printers.
C) the extra revenue from selling a few additional printers to the average cost of producing the
additional printers.
D) HP's printers to printers from competing companies, such as Lexmark.

10.Which of the following is a positive statement?

A) An unemployment rate of 9 percent is a national disgrace.
B) Unemployment is a more important problem than inflation.
C) When the national unemployment rate is 9 percent, the unemployment rate for inner-city
youth is often close to 40 percent.
D) Unemployment and inflation are equally important problems.

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11. Which of the following is NOT true concerning a society's production possibilities frontier
(PPF)?
A) It reveals the maximum amount of any two goods that can be produced from a given quantity
of resources.
B) Tradeoffs occur when moving along a PPF.
C) Production efficiency occurs when production is on the frontier itself.
D) Consumers will receive equal benefits from the two goods illustrated in the PPF.

12. Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon
rides but to do so he must produce fewer boat rides. Harry is ________ his production
possibilities frontier.
A) producing inside
B) producing on
C) producing outside
D) producing either inside or on

13. Considering a PPF with health care services on the vertical axis and other goods and services
on the horizontal axis, the increasing production of health care services in the United States as a
result of the aging population represents
A) a movement upward along the PPF.
B) an outward shift of the PPF from the vertical axis.
C) an outward shift of the PPF from the horizontal axis.
D) a movement downward along the PPF.

14. When moving along the production possibilities frontier, opportunity cost is measured as the
A) increase in the quantity produced of one good divided by the decrease in the quantity
produced of another good.
B) decrease in the quantity produced of one good divided by the increase in the quantity
produced of another good.
C) quantity produced of one good divided by the quantity produced of another good.
D) quantity produced of one good multiplied by the quantity produced of another good.

15. While producing on the production possibilities frontier, if additional units of a good could
be produced at a constant opportunity cost, the production possibilities frontier would be
A) bowed outward.
B) bowed inward.
C) positively sloped.
D) a straight line.

16. An increase in the production of capital goods

A) must increase the current production of consumer goods.
B) must decrease the future production of consumer goods.
C) shifts the production possibilities frontier inward in the future.
D) shifts the production possibilities frontier outward in the future.

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17. Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4
coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is
________, and she should specialize in the production of ________.
A) 1/3 coconut per fish; fish
B) 2/3 coconut per fish; coconuts
C) 1 coconut per fish; fish
D) 4 coconuts per fish; fish

18. If Tom and Di specialize in producing the goods in which he and she have a comparative
advantage and they exchange goods, then
A) each will produce a combination of goods that is within her/his production possibility
frontier.
B) they will lose because they are no longer able to produce and consume both goods.
C) each will gain because each can consume a combination of goods that is outside her/his
production possibility frontier.
D) one of them will gain and the other will lose.

19. Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and
that a typical American factory can produce 10 cameras or one computer in an hour. Germany
wishes to purchase computers from the United States in exchange for cameras. What is the
maximum number of cameras per computer that Germany would be willing to pay the United
States?
A) 10 cameras per computer
B) 20 cameras per computer
C) 1 camera per computer
D) 2 cameras per computer

20. Markets
A) facilitate trade.
B) allow traders to enjoy gains from trade.
C) coordinate price information between buyers and sellers.
D) All of the above answers are correct.

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Part 2: Short and Long Questions

Use the following data to work Question 1 to 3.

Brazil produces ethanol from sugar, and the land used to grow sugar can be used to grow food
crops. The table to the right sets out Brazil’s production possibilities for ethanol and food crops.

Ethanol Food crops

(barrels per day) (tons per day)
70 and 0
64 and 1
54 and 2
40 and 3
22 and 4
0 and 5
Question 1
(a) Draw a graph of Brazil’s PPF and explain how your graph illustrates scarcity.
(b) If Brazil produces 40 barrels of ethanol a day, how much food must it produce to achieve
production efficiency?
(c) Why does Brazil face a tradeoff on its PPF?

Question 2
(a) If Brazil increases ethanol production from 40 barrels per day to 54 barrels per day, what is
the opportunity cost of the additional ethanol?
(b) If Brazil increases food production from 2 tons per day to 3 tons per day, what is the
opportunity cost of the additional food?
(c) What is the relationship between your answers to parts (a) and (b)?

Question 3
Does Brazil face an increasing opportunity cost of ethanol? What feature of Brazil’s PPF
illustrates increasing opportunity cost?

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Use the following data to work Question 4 and 5.
In an hour, Marco can produce 5 cups of pesto sauce or 15 platters of pasta and Giorgia can
produce 8 cups of pesto sauce or 20 platters of pasta.

Question 4
(a) Calculate Marco’s opportunity cost of producing a cup of pesto sauce.
(b) Calculate Giorgia’s opportunity cost of producing a cup of pesto sauce. Who has a
comparative advantage in producing pesto sauce?
(c) If Marco and Giorgia specialize in producing the good in which they have a comparative
advantage, and then trade 11 platters of pasta for 4 cups of pesto sauce, who gains from the
specialization and trade?

Question 5
Suppose that Giorgia finds a new way to cook pasta that enables her to make 30 platters an hour.
(She can still make only 8 cups of pesto sauce an hour.)

(a) Who now has a comparative advantage in producing pasta?

(b) Can Marco and Giorgia still gain from trade?
(c) Would Marco and Giorgia still be willing to trade 11 platters of pasta for 4 cups of pesto
sauce? Explain your answer.