Name: ______

Team: ______

Corrected By: ______

Unit I: Basic Economic Concepts

Problem Set #1

Integrity Agreement

I agree that all of the work in this presentation is my original work. I agree to keep this work to myself this year and for future years. I understand that if this work is not my own original work or if I share my original work with others, that I will be sent to my GLC for academic dishonesty.

Digital Signature: type your full name here

  1. Complete each of the following tasks with bullet points:
  1. Define scarcity and explain how it is related to trade-offs and opportunity costs (____/3)
  2. Fully explain the difference between the following (USE EXAMPLES FOR EACH)
  3. Normative and Positive Economics (____/3)
  4. Price vs. Cost (____/3)
  5. Consumer Goods and Capital Goods (____/3)
  6. Accounting Profit vs. Economic Profit (____/3)
  7. Resources/Factors of Production (____/4)
  8. Allocative and Productive Efficiency (_____/3)
  9. Free-Market and Centrally Planned Economies (_____/3)
  10. Resource Markets and Product Markets (____/3)
  1. Draw Production Possibilities Graph for the Ford Motor Co. using the following information: (____/5)

A / B / C / D / E / F / G
X-Cars / 0 / 12 / 22 / 31 / 38 / 43 / 45
Y-Trucks / 35 / 33 / 30 / 25 / 18 / 10 / 0
  1. What are the consequences of Ford producing at combination A? Combination G? In reality, are either combinations desirable? Why? Why not? (____/5)
  2. Plot the combination with 30 cars and 35 trucks and label it “H.” Plot the combination with 20 cars and 20 trucks and label it “I.” Explain what is happening at these points? (____/5)
  3. Explain, with examples, how your graph shows these 5 concepts:
  4. Opportunity costs (____/2)
  5. Efficiency (_____/3)
  6. Unemployment (_____/2)
  7. The law of increasing opportunity costs (____/2)
  8. Economic growth (____/2)
  1. Use PPF-A and PPF-B (below) to answer the following:
  2. On PPF-A, what is the opportunity cost from point a to b in terms of wheat? What is the PER UNIT OPPORTUNITY COST from moving from e to c? (____/4)
  3. On PPF-B, what is the opportunity cost from point a to b in terms of guns? What about moving from b to c? (____/4)
  4. Based on the information given, what can you determine about the resources used in each PPF? (____/2)
  5. Which PPF shows increasing opportunity costs? Use numerical examples to explain why? (____/2)

4. Costa Rica and Guatemala can produce bananas and sugarcane. The following figures represent the amount that can be produced with a fixed amount of factor inputs. Answer the following questions:

Bananas / Sugarcane
Guatemala / 50 / 100
Costa Rica / 30 / 90
  1. Which country has the absolute advantage in bananas? Explain using numbers. Which country has the absolute advantage in sugarcane? Explain using numbers.(____/4)
  2. Which country has the comparative advantage in bananas? Explain using numbers. (____/3)
  3. Which country has the comparative advantage in sugarcane? Explain using numbers. (____/3)
  4. Given the information above, should these countries trade? If so, what should each country export and import? What would be the terms of trade for both Bananas and Sugarcane?What would be the benefit of specialization and trade? (____/6)

5. Stamps (____/5)6. Format (_____/5)