1. What is: a) The opportunity cost of producing at point B instead of C (1 point): Answer: b) What is the OC of producing at point C instead A? (1 point): Answer: Production possibility curve Beer 200 180 120 40 50 100 150 200 Wine 2. The graph above implies that the opportunity cost of producing 150 units of wine is approximately 85 units of beer (Note that the last point on the Y axis reads 205u). Explain why this is a true or false statement. (1 points) Answer:3. Explain how the graphs below about the PPC (Left vs Right) differ: (2 points) Answer: Production possibility curve Production possibility curve Beer 230 200 180 100 150 190 Wine 750 Wine 4. Interpret the graph below: a) What is exactly occurring in this graph? In other words, what specifically changed? Notice, there are 2 curves, not just one. (1 point) Answer: b) Which possible variable could have caused the change you see? (You can take your pick, so long it's valid..worth 1 point) Answer: Price $35 $30 $25 $20 $15 Demand New Demand $10 Quantity 10 20 30 40 60 70 80 (in thousands) 5. Explain how going from point A to B is different than from going A to C, instead: (1 point)Change in Quantity Supplied vs. Shift in Supply. Change in Quantity Price Supplied B Shift in Supply Quantity of apples 6. Interpret the graph by answering the following questions: a) What exactly takes place on this graph below? (1 point) Answer: b) Explain how J is different from M. (1 point) Answer: Figure 6 - Connecting the Observation Points K L Price per Unit ($) M N 0 10 20 30 40 50 60 70 80 T-Shirts per Week7. Indicate the direction of Demand and/or Supply (not quantities or prices): whether they increase or decrease, in the following situations for Starbucks Coffee conventional brand), and explain why. (7 points) a. Mcdonald's introduces McCafe: Answer: b. Training baristas is becoming more expensive: Answer: c. The company can sell flavored teas, which have a rising price: Answer: d. Prices in this industry are expected to drop in the future: Answer: e. Local Median income rises: Answer: f. New quality pastries are added to the menu: Answer: g. A coffee tax is added to the producer: Answer: 8. suppose a nation has the following alternative production: (4 points total - 1 point each) Table 1.1. Alternative Production Possibilities Production Cloth (in Wheat (in possibilities thousand thousand metres quintals) O 15 14 12 9 a. If the economy is producing at alternative D, what is the cost of one more unit of Cloth?Answer: b. If the economy is producing at alternative C, what is the cost of one more unit of Wheat? Answer: b) Is this economy subject to the law of increasing opportunity costs? How can you tell? Answer: c) Suppose the economy is currently producing 3 units of Cloth and 7 units of Wheat, is this economy producing efficiently? Answer: 9. What does it mean to ask what the opportunity cost of anything is? If it helps you, feel free to offer an example. (1 point.)
