Question

What is the incentive of spending several years and thousands of dollars to earn a college degree? (1 pt.)

In attempt to reduce the use of fossil fuels, the government is encouraging individuals and businesses to use solar panels. However, the installation of solar panels can be extremely expensive for most people. What can the government do to encourage more people to install the solar panels? (1 pt.)

Suppose you decide to go to a Bruins hockey game instead of studying for your economics exam. Because of this, you only scored a 76% on the exam. If you had stayed home to study, you would have earned an 84%. (2 pts.)
What is your opportunity cost of going to the game?

In your opinion, was the benefit of going to the game greater than the cost? Briefly explain your answer.

For each of the following statements, identify if it’s a positive or normative statement. (4 pts.)
If more people choose to earn a higher degree, the nation’s productivity will increase.

The government should supply more subsidies or scholarships for more people to go to college.

Going to college is the wisest choice anyone could make.

Unemployment will fall if more people attend college.

Briefly explain why economists disagree on what policy to implement. (1 pt.)

List 5 of the economic principals discussed in class. For each, provide an example of when the use of that principal affected your life. (5 pts.)

Name two factors that can contribute to the growth of an economy. (1 pt.)

When can an economy increase the production of one good without reducing the output of another? (1 pt.)

Name a benefit of trade. (1 pt.)

Suppose Country A and Country B currently have identical production possibilities frontier (PPF). However, Country A is producing more capital goods than consumption goods compared to Country B. Which country will have a larger PPF in the future, ceteris paribus? Briefly explain your answer. (2 pts.)

Camp Green Lake can use its resources to produce shovels or hi-tech metal detectors. They use all of their resources to produce either 250 shovels, 175 hi-tech metal detectors, or a combination of both shovels and hi-tech metal detectors. Currently, Camp Green Lake is producing 205 shovels and 55 metal detectors. (7 pts.)
Draw the production possibilities frontier for Camp Green Lake. Label anything that requires a label, identify the intercepts for the X- and Y-axes, and identify the Camp’s currently level of production.

The Lake is debating about cutting back its production of shovels to 198 while maintaining the current level of production for hi-tech metal detectors. Is this a wise idea? Briefly explain your answer.

If the Camp wants to increase its production of shovels to 210, it will have to cut its production of hi-tech metal detectors back to 40. Calculate the opportunity cost of producing one extra shovel. Show your work.

If the Camp wants to increase its production of hi-tech metal detectors to 75, it will have to cut its production of shovels back to 200. Calculate the opportunity cost of producing one extra metal detector. Show your work.

Suppose Camp Green Lake bought a new machine that produces more hi-tech metal detectors in a day than their previous machine. Using the graph above, illustrate how this will affect their production possibilities frontier.

Ohio and Indiana can produce corn and wheat. The following table shows the maximum each state can produce if they use all of their resources towards that crop. Assume each state has a constant opportunity cost for both crops. (9 pts.)

Crop   Maximum Ohio can Produce   Maximum Indiana can Produce
Corn   255 bushels   200 bushels
Wheat   440 bushels   280 bushels

Which state has an absolute advantage of producing corn?

Which state has an absolute advantage of producing wheat?

Calculate Ohio’s opportunity cost of producing one more bushel of corn. Show your work.

Calculate Indiana’s opportunity cost of producing one more bushel of corn. Show your work.

Which state has a comparative advantage of producing corn?

Calculate Ohio’s opportunity cost of producing one more bushel of wheat. Show your work.

Calculate Indiana’s opportunity cost of producing one more bushel of wheat. Show your work.

Which state has a comparative advantage of producing wheat?

Which crop should each state specialize in producing to maximize benefits from trading?

Answer 1

What is the incentive of spending several years and thousands of dollars to earn a college degree? (1 pt.)

Answer: An opportunity to earn more in future. Also a personal development in all fields of life makes this investment worth.

In attempt to reduce the use of fossil fuels, the government is encouraging individuals and businesses to use solar panels. However, the installation of solar panels can be extremely expensive for most people. What can the government do to encourage more people to install the solar panels? (1 pt.)

Government can provide subsidy. If a solar appliance is costing $1000 then govt. may give 40 % subsidy so that consumer will have to pay only $600. This will encourage customers to invest and cost of burning fossil fuels will decrease.

Suppose you decide to go to a Bruins hockey game instead of studying for your economics exam. Because of this, you only scored a 76% on the exam. If you had stayed home to study, you would have earned an 84%. (2 pts.)
What is your opportunity cost of going to the game?

The opportunity cost is 8%. The opportunity cost is the next best alternative foregone. The loss was of 84-76= 8 %

In your opinion, was the benefit of going to the game greater than the cost? Briefly explain your answer.

The joy of hockey game is a gain. The loss of study may cost more in exam but the joy may last for a long time. Hence both decisions will have opportunity cost.

For each of the following statements, identify if it’s a positive or normative statement. (4 pts.)

First, normative statement is a statement that explains what things should be. Positive statement explain what things are.

If more people choose to earn a higher degree, the nation’s productivity will increase.

Normative statement.

The government should supply more subsidies or scholarships for more people to go to college.

Normative statement.

Going to college is the wisest choice anyone could make.

Normative statement.

Unemployment will fall if more people attend college.

Normative statement.

All statements are normative because they all explain what things should be.