Economic 1

1. Below are six statements. Indicate whether each one pertains to microeconomics (MIC) or macroeconomics (MAC). (a) "Last year. IBM was the U.S. business with the most patents registered with the U.S. government." (b) "The U.S. economy grew at an annual rate of 4.2 percent last year." "Snow in the northeast has reduced the number of holiday shoppers at clothing stores and clothing prices are falling." (d) "More workers are being hired by the nation's businesses." (e) "The U.S. economy imported more goods and services than it exported last year." (f) "New discoveries in medicine are leading to strong growth in the biotech industry." 2. The production possibilities curve below shows the hypothetical relationship between the production of guns (national defense) and butter (social goods) in an economy. Combination Guns Butter A 14 26 36 44 (a) What is the opportunity cost of producing the second unit of butter? (b) What is the total opportunity cost of producing the second unit of butter? (c) What is the opportunity cost of producing the third unit of butter? (d) What is the total opportunity cost of producing the third unit of butter? 3-Explain how each event affects production possibilities. (a) The population becomes more educated over time as the number of high school dropouts falls and the number of college graduates rises. (b) The unemployment rate declines from 7.3 to 4.5 percent of the labor force. (c) Businesses and government are unable to solve a major computer problem, thus reducing economic efficiency and national output. (d) Advances in telecommunications and new technology significantly contribute to economic growth over time. (e) The Congress and the President decide to allocate more resources to national defense. (f) A nation participates in increased international trade with other nations of the world