Problem Set

Don’t say “but what if it says?” The answers are specific. Directions Put away you pen and pencils Put your name and write “Graded by:” After grading each question, write in their score in the blank. ex: ( ____/5) Follow the directions!!! Don’t say “but what if it says?” The answers are specific. Ex: If on a multiple choice the right answer is A, you wouldn’t ask…“but what if it says D?”

Question #1

Write in the score ex: ( ____/5) Question #1A 5 Point Total 1 Point-Scarcity is the idea that we have unlimited wants, but limited resources 1 Point-Because we can’t have everything we are forced to make choices 1 Point-Tradeoffs are all the things given up when a choice is made. 1 Points- Every choice we make involves a tradeoff. 1 Point- The answer is written in such a way that shows that these concepts are interrelated. They do not get this point if they simply define these words without showing how they are linked. Write in the score ex: ( ____/5)

Question #2

Write in the score ex: ( ____/5) Question 2: Graph The Graph: 5 Point Total (1point) The axis have numbers (1point) One axis is labeled “Trucks” (1point) The other axis is labeled “Cars” (1point) EVERY point is plotted correctly (1point) ALL points are labeled A,B,C,D,E,F,G Write in the score ex: ( ____/5)

Question 2A 5 Point Total 1 Point-At combo A, Ford is using all the resources to make Trucks 1 Point-At combo G, Ford is using all the resources to make Cars 1 Point-Neither combo is desirable 2 Points- Consumers likely want trucks and cars. If Ford only makes one or the other they are going to loose profit. Combinations A and G are not allocatively efficient.

Question 2B 5 Point Total 1 Point-Correctly plotted and labeled point X at 20 cars and 40 trucks 1 Point-Correctly plotted and labeled point Y and 25 cars and 20 trucks 1 Point- Combo X is unattainable because there are not enough resources 1 Points- Combo Y is inefficient because more of either goods can be produced without giving up the other. 1 Points- Explanations are clear and show that the students understands WHY the points are unattainable and inefficient.

Question 2C Opportunity Cost (2 Points) 1 Point- The PPF demonstrates opportunity cost by showing exactly how much of a good is forgone when additional units of another good are being produced. 1 Point- Numeric example of opportunity cost

Question 2C Efficiency (3 Points) 1 Point- Productive efficiency is demonstrated on the PPF as points on the curve. These different combinations show that the economy is using all its resources to produce the maximum amount of products 1 Point- Example. Ex: Point D 1 Point-Allocative efficiency involves making the combination of goods most desired by society. This can be demonstrated by the PPF by moving along the curve towards optimal combinations determined by society.

Question 2C Unemployment (2 Points) 1 Point- Unemployment on the PPF is shown by any point within the curve. These points show an inefficient use of resources since more of both goods can easily be produced without giving up more of either good. 1 Point- Numerical example inside curve

Question 2C Law of Increasing opportunity Cost (2 Points) 1 Point- The law of increasing opportunity cost can be shown using a PPF by bowing out the curve away from the origin. When the curve is bowed out, production of additional units of one good results in increasing losses in the production of the other good. 1 Point- Example showing that opportunity cost increase.

Write in the total score on the top of the cover page. Question 2C Economic Growth (2 Points) 1 Point- If the graph were to shift outward there would be economic growth because more of both goods could be produced 1 Point- Example describing how the PPC can shift outward do to a change in resources, technology, or trade. Write in the total score on the top of the cover page.

Question #4

1a. Laws of Demand and Supply 5 Point Total 1 Points- Correct definition of Law of Demand (Inverse relationship between price and QUANTITY demanded) 1 Points- Example of Law of Demand 1 Points- Correct definition of Law of Supply (Direct relationship between price and QUANTITY supplied) 1 Points- Example of Law of Supply 1 Points- Clarity of examples

1b. Laws of Dim. Marg. Utility 5 Point Total 2 Points- Correct definition of the Law of Diminishing Marginal Utility (As you consume more of any good, the additional satisfaction from each new unit will eventually start to decrease) 2 Points- Example of the Law 1 Points- Clarity of example

1c. Normal and Inferior 5 Point Total 1 Points- Correct definition of normal good (when income increased, demand increases) 1 Points- Example of normal good 1 Points- Correct definition of inferior good (when income increased, demand decreases) 1 Points- Example of inferior good 1 Points- Clarity of examples

1d. Consumers and Producers Surplus 5 Point Total 1 Points- Correct definition of Consumers Surplus (difference between the amount a buyer is willing to pay and the price they do pay) 1 Points- Example of CS 1 Points- Correct definition of Producers Surplus (difference between the price and the sellers minimum price) 1 Points- Example of PS 1 Points- Clarity of examples

5a. S&D Study Guide 5 Points Total

(exclude the second S&D graph on the back) 5 Point Total Note sheet: Demand and Supply 5 points if completed entirely. NO blanks. (exclude the second S&D graph on the back) 4 points if one graph or section blank 3 points if two sections blank 2 points if three sections blank 1 point if four sections bank

2b. S&D Practice 5 Points Total

5b. Practice Sheet 5 Points Total (circle their mistake) D decrease, P and Q decrease S decrease, P increase and Q decrease D increase, P and Q increase S increase, P decrease and Q increase No shift, surplus, P increase and Q decrease No shift, Ceiling below eq, P dec and Q dec S inc AND D inc, P Indeterminate and Q inc