Final Exam Macro Review

Budget lines always slope_________because there is a(n)_________relationship between the two goods represented by the budget line.

The area beyond the budget line represents combinations of goods that (given your current income) are_________.

downward; inverse

unattainable

Potatoes cost Janice $1 per pound, and she has $5.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30 per pound.

Instructions: Enter your answers as a whole number.

1. How many pounds of potatoes will she purchase?

How many pounds will she purchase if she has only $2 to spend?

3 pounds of potatoes

2 pounds of potatoes

Potatoes cost Janice $1.00 per pound, and she has $6.00 that she could possibly spend on potatoes or other items. Suppose she feels that the first pound of potatoes is worth $1.50, the second pound is worth $1.14, the third pound is worth $1.05, and all subsequent pounds are worth $0.30 per pound.

Instructions: Enter your answers as a whole number.

1. How many pounds of potatoes will she purchase?

How many pounds will she purchase if she has only had $3.00 to spend?

3 pound(s) of potatoes

3 pound(s) of potatoes

Pham can work as many or as few hours as she wants at the college bookstore for $12 per hour. But due to her hectic schedule, she has just 15 hours per week that she can spend working at either the bookstore or other potential jobs. One potential job, at a café, will pay her $15 per hour for up to 6 hours per week. She has another job offer at a garage that will pay her $13 an hour for up to 5 hours per week. And she has a potential job at a daycare center that will pay her $11.50 per hour for as many hours as she can work. Assume that the travel time between job locations is negligible.

If her goal is to maximize the amount of money she can make each week, how many hours will she work at the bookstore?

Instructions: Enter your answer as a whole number.

4 hours

Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. Candy bars cost $0.75 each while bags of peanuts cost $1.50 each.

1. Complete the table below (gray-shaded cells) showing the alternative combinations of the two products that are available.

   Instructions: Enter your answers as a whole number.

Alternative Combinations
Goods	A	B	C	D	E	F
Candy bars	0	4	8	12	16	20
Bags of peanuts	10 Numeric Response 1.Edit Unavailable. 10 correct.	8 Numeric Response 2.Edit Unavailable. 8 correct.	6 Numeric Response 3.Edit Unavailable. 6 correct.	4 Numeric Response 4.Edit Unavailable. 4 correct.	2 Numeric Response 5.Edit Unavailable. 2 correct.	0

Use the data in the table to plot a budget line in the graph.

Instructions: Use the tool provided 'Budget' to draw a single budget line. Plot each of the six combinations (A–F) above (plot 6 points total).

Instructions: Enter your answer rounded to 1 decimal place. Do not use a negative (−) sign.

What is the opportunity cost of one more candy bar?

Of one more bag of peanuts?

Do these opportunity costs rise, fall, or remain constant as additional units are purchased?

Does the budget line tell you which of the available combinations of candy bars and bags of peanuts to buy?

Suppose that you had won $30 on your ticket, not $15. Is the slope of a new budget line flatter, steeper, or the same as in the diagram above?

Has the number of available combinations increased or decreased?

10, 8, 6, 4, 2, 0

points do them based off table slope -.75__1.5=-.5

0.5 bag(s) of peanuts

2 candy bar(s)

Remain constant

No

The same

Increased

Suppose that you are on a desert island and possess exactly 20 coconuts. Your neighbor, Friday, is a fisherman, and he is willing to trade 2 fish for every 1 coconut that you are willing to give him. Another neighbor, Kwame, is also a fisherman, and he is willing to trade 3 fish for every 1 coconut.

1. On the diagram below, draw budget lines for trading with Friday and for trading with Kwame. (Put coconuts on the vertical axis.)

   Instructions: Use the tools provided 'Friday' and 'Kwame' to draw two separate budget lines representing Friday's willingness to trade and Kwame's willingness to trade. The lines should contain only the two endpoints of each line.

1. Instructions: Enter your answers rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign (−) in front of those numbers.

2. What is the slope of the budget line from trading with Friday (coconuts for fish)?

What is the slope of the budget line from trading with Kwame (coconuts for fish)?

Which budget line features a larger set of attainable combinations of coconuts and fish?

If you are going to trade coconuts for fish, would you rather trade with Friday or Kwame?

Trade with Friday slope=-1/2 Trade with Kwame Slope = -1/3

-0.50

-0.3

The buget line from trading with Kwame

Kwame

Refer to the following production possibilities table for consumer goods (automobiles) and capital goods (forklifts):

Type of Production	Production Alternatives
	A	B	C	D	E
Automobiles	0	2	4	6	8
Forklifts	30	27	21	12	0

1. Show these data graphically.

   Instructions: Use the tool provided 'PPC' to draw a production possibilities curve (plot 5 points total).

Upon what specific assumptions is this production possibilities curve based?

If the economy is at point C, what is the (opportunity) cost of producing two more automobiles?

What is the (opportunity) cost of six more forklifts?

Which characteristic of the production possibilities curve reflects the law of increasing opportunity costs: its shape or its length?

f the economy characterized by this production possibilities table and curve is producing 3 automobiles and 20 forklifts, what could you conclude about its use of its available resources?

The economy is _______ its available resources.

Is production at a point outside the production possibilities curve currently possible?

Could a future advance in technology allow production beyond the current production possibilities curve?

Could international trade allow a country to consume beyond its current production possibilities curve?

D (12,6) C (21,4) B (27, 2)

Full employment, fixed supplies of resources, fixed technology, and two goods

9 forklifts

2 automobiles

Shape

underutilizing

No

Yes

Yes

Refer to the table below.

Type of Production	Production Alternatives
	A	B	C	D	E
Automobiles	0	2	4	6	8
Forklifts	30	27	21	12	0

1. Suppose improvement occurs in the technology of producing forklifts but not in the technology of producing automobiles. Draw the new production possibilities curve.

   Instructions: Use your mouse to click on either one or both of the endpoints of the PPC and drag inward or outward as necessary.

Now assume that a technological advance occurs in producing automobiles but not in producing forklifts. Draw the new production possibilities curve.

Instructions: Use your mouse to click on either one or both of the endpoints of the PPC and drag inward or outward as necessary.

Now draw a production possibilities curve that reflects technological improvement in the production of both goods.

Instructions: Use your mouse to click on either one or both of the endpoints of the PPC and drag inward or outward as necessary.

—>

Up arrow

Up and right

A production possibilities table for bananas and apples is shown below:

Type of Production	Production Alternatives
	A	B	C	D	E
Bananas (pounds)	0	20	40	60	80
Apples (pounds)	100	75	50	25	0

1. Show these data graphically.

   Instructions: Use the tool provided 'PPC' to draw a production possibilities curve (plot 5 points total).

Does the economy above demonstrate the law of increasing opportunity cost?

Based on this information, what is the opportunity cost of a pound of apples?

What is the opportunity cost of a pound of bananas?

Table to graph points

No

0.80 pound(s) of bananas

1.25 pound(s) of apples

A production possibilities table for DVDs and computers is shown below.

Type of Production	Production Alternatives
	A	B	C	D	E
Computers	0	20	40	60	80
DVDs	80	70	55	35	0

 

1. Show these data graphically, and then identify a point that indicates an inefficient use of resources and a point that indicates an unattainable combination of goods.

   Instructions: Use the tool provided 'PPC' to draw a production possibilities curve (plot 5 points total).

   
   Point____ is an example of an inefficient point, while point ___ is an example of an unattainable point.

2. Does the economy above demonstrate the law of increasing opportunity cost?

Graph points from table

G, F

Yes

A production possibilities table for DVDs and computers is shown below.

Type of Production	Production Alternatives
	A	B	C	D	E
Computers	0	20	40	60	80
DVDs	80	70	55	35	0

1. Show these data graphically.

   Instructions: Use the tool provided 'PPC' to draw a production possibilities curve (plot 5 points total).

   What is the opportunity cost of the first 20 computers?

Between which two consecutive points along the PPC is the opportunity cost of DVDs the highest?

Graph the tables points

10 DVD(s)

B and A

Below is a production possibilities table for cell phones and computers:

Type of Production	Production Alternatives
	A	B	C	D	E
Computers	0	20	40	60	80
Cell Phones	80	70	55	35	0

Instructions: Enter your answers as a whole number.

1. What is the opportunity cost of moving from point A to point B (20 additional computers)?

What is the opportunity cost of moving from point B to point C (20 additional computers)?

What is the opportunity cost of moving from point C to point D (20 additional computers)

What is the opportunity cost of moving from point D to point E (20 additional computers)?

As we produce more computers, opportunity costs are ______

10 Cell Phones

15 Cell phones

20 Cell phones

35 Cell phones

increasing

A production possibilities table for cell phones and computers is shown below.

Type of Production	Production Alternatives
	A	B	C	D	E
Computers	0	20	40	60	80
Cell Phones	80	75	65	40	0

Instructions: Enter your answers as a whole number.

1. What is the opportunity cost of computers when moving from point A to point B?

What is the opportunity cost of computers when moving from point B to point C?

What is the opportunity cost of computers when moving from point C to point D?

What is the opportunity cost of computers when moving from point D to point E?

As we produce more computers, opportunity costs are _______

5 Cell Phones

10 Cell Phones

25 Cell Phones

40 Cell Phones

increasing

chap 1 quiz