1. Read the following quote and answer the questions with complete sentences.

"There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa."? Frdric Bastiat, French Economist (1801-1850)

a. fully explain his main idea. Be sure to use the words "incentives" and "opportunity cost" in your answer

b. In an effort to get students to come to class on time, assume that your instructor establishes a policy where 20 points are deducted from your grade if you show up to class more than 10 minutes late. Explain two different unforeseen effects that could cause this policy to backfire and actually encourage students to come late or ditch class.

c. Think of a well-intentioned policy that on the surface appears to help people but in reality would likely create incentives that end up hurting people. Identify the policy and explain why it would be "disastrous".

2. Assume that it takes John Connor 8 labor units to produce a tomato and 4 to produce a squash in his garden.It takes Sarah Connor 15 labor units to produce a tomato and 3 to produce a squash in her garden.

a. Which Connor has an absolute advantage in the production of tomatoes?

b. Which Connor has an absolute advantage in the production of squash?

c. Which Connor has a comparative advantage in the production of tomatoes?

3. Define each of the following terms and make an example that clearly demonstrates your understanding of the "real world" application of the term.

a. The law of demand and the law of supply

b. The law of diminishing marginal utility

c. Normal goods and inferior goods

d. Substitutes and complements

4. Below is information regarding Cory's Surfboard Inc. Complete the table and do the following:

1. On a large graph, plot the MC, AFC, AVC, and ATC curves from this data. This can be sent via email.
2. EXPLAIN what would happen to each of Cory's per unit cost curves if the price of Styrofoam blanks (a variable input) increases. How would the cost curves change if there were an increase in his rent (a fixed input)? Explain why the results are different.
3. If the market for surfboards was perfectly competitive and the market price was $150, how many surfboards should Cory make?How much is total profit and how much profit will he make for EACH surfboard? Draw the firm's demand on your graph in a. Explain how you got your answer.

Total Variable Total Cost Average Fixed Average Variable Average Total Marginal Product Costs (TVC) (TC) Cost (AFC) Cost (AVC] Cost (ATC) Cost (MC) 50 $100 1 60 2 90 3 130 4 180 5 250 6 340 7 490 B 680Units of Total Marginal Product Total Marginal Labor Product Product Price Revenue Revenue (L] (TP) (MP) (P) (TR) Product 52 1 17 52 2 31 52 3 43 52 4 53 52 5 60 52 65 52