Third Homework Assignment
ECON 272-5 (11:15)
Due at the beginning of class on Friday, Feb. 3
23 pts.
Directions: Copy this page into a word document and type your answers. Use at least 10 pt. font. Leave the questions on your answer sheet.
Leave space here for you PPF (do not draw on a separate sheet of paper).
2. Given the assumptions of the model, on the PPF you drew:
a. label a point A that is impossible to attain at this time. (1 pt.)
b. label a point B that indicates that more of both goods could be produced. (1 pt.)
c. starting with 100 hours of free time and 200 units of food, show the opportunity cost of producing 50 more units of food (which equals 20 hours of free time) by drawing an arrow showing the cost and putting the correct numbers (of what would be produced after the change) on your axes (so you should have 4 numbers total). (5 pts.)
d. given the definition of wealth we are using in this class, explain why one combination of food and free time would be more efficient than another combination of free time along the frontier. (3 pts.)
e. with respect to determining the "efficient" point you discussed above, what creates the problem of having to discover where that is? One word please ________________________________________. (1 pt.)
For all multiple choice questions - you must type your answer or it will not count. For example, at the end of the question, type: answer: a or b or c, etc. Again, all answers not typed in your homework will not count. (2 pts. each)
According to the model, economic growth is a shift to the right in the production possibilities frontier. Which of the possible answers
listed below would not result in a rightward shift in the production possibilities frontier, given our discussions in class?
3. All of the following except ____________________ will result in economic growth (assuming the right rules are in place to make these things happen):
a. growth in the labor force
b. growth in capital goods
c. improvements in technology
d. an increase in entrepreneurship
e. None of the above make sense
ANSWER:
A poor economy must necessarily devote most of its resources to the production of consumption goods just to
provide for subsistence (staying alive).
4. Given our discussion in class, capital accumulation (the production of more capital goods) is limited in poor countries because
a. their citizens don’t want to work
b. most of their resources must be devoted to production for subsistence
c. too much division and specialization of labor
d. all people in these countries are obviously quite satisfied to be poor
e. None of the above makes sense
ANSWER:
5. Scarcity implies that the allocation scheme chosen by society along a production possibilities frontier:
a. If the maximum amount of one good is produced, none of the other good can be produced.
b. We cannot make more of one good except at the expense of making less of another.
c. We can always
make more of all goods simultaneously.d. All points along the frontier are equally efficient
e. More than one answer is correct
ANSWER:
6. Point Production of X Production of Y (these are combinations along a production possibilities frontier)
X Y
a 0 40
b 4 36
c 8 28
d 12 16
e 16 0
Refer to the information above. The marginal opportunity cost of increasing the production of Y from 16 to 36 units is:
a. 4 units of X
b. 8 units of X
c. 10 units of X
d. 12 units of X
e. None of the above makes sense
ANSWER:
7. When trying to decide where we should produce (how much of each good) along a production possibilities frontier (and the assumptions of the model), what should be considered (if we want to be efficient)?
a. how many resources are used
b. how much time is involved
c. what people value
d. the end result
e. None of the above makes sense
ANSWER: