1.Explain whether each of the following is an example of a macroeconomic concept or a microeconomic concept.
- Congress is debating the option of implementing a value-added tax as a means to cut the federal deficit.
b. Jamba Juice is contemplating increasing the price of its new green smoothie product.
c.The Federal Reserve announces it is increasing the discount rate in an attempt to slow the rate of inflation.
2.For each of the following, identify the full cost (meaning opportunity cost) involved:
a. Aaron spends $150 on basketball shoes.
b. Ann decides to drive to San Francisco from Los Angeles to visit her boyfriend.
c.James decides to go to a club and stays out all night before his economics exam.
3.Label each statement as either positive or normative economic analysis.
a. The inheritance tax should be repealed because it is unfair.
b. Allowing Chile to join NAFTA would cause wine prices in the U.S. to drop.
c. The first priorities of the new regime in the Republic of South Sudan should be to rebuild schools and highways and to provide basic health care.
4.Explain how each of the following situations would affect a nation’s production possibilities curve.
a.A technological innovation allows the nation to more efficiently convert solar energy into electricity.
b. A prolonged recession increases the number of unemployed workers in the nation.
c. The quality of education in the nation’s colleges and universities improves greatly.
d. A category 5 hurricane destroys over 40 percent of the nation’s productive capacity.
5.A nation with fixed quantities of resources is able to produce any of the following combinations of bread and ovens:
Loaves of Bread (Millions) Oven (Thousands)
These numbers assume that a certain number of previously produced ovens are available in the current period for baking bread.
a. Using the data in the table, graph the ppf (with ovens on the vertical axis).
b. Does the principles of “increasing opportunity cost” hold in this nation? Explain briefly (Hint: What happens to the opportunity cost of bread – measured in number of ovens – as bread production increases?)
c. If this country chooses to produce both ovens and bread, what will happen to the ppf over time? Why?