Principles of Microeconomics Written Homework

1)This problem is based on Chapter 1 Problems and Applications 3 (1 point each)

a) You are planning to spend Saturday working at your job, but a friend asks you to go out that night. What is the true cost of going out?

b)Now suppose that you were planning to spend Saturday night studying and catching up on Economics homework.What is the true cost of going out in this case?

c)Explain which economic topic is illustrated with these questions and why the two answers differ.

2)These problems come from Chapter 2 Problems and Applications 5 (1 point each)

Classifythe following topics as relating to microeconomics or macroeconomics andexplainyour reasoning for each statement.

a)A family's decision about how much income to save.

b)A firm's decision about how many workers to hire.

c)The relationship between the inflation rate and the changes in the quantity of money.

3)These problems come from Chapter 2 Problems and Applications 6 (1 point each)

Classifythe following statements as positive or normative andexplainyour reasoning for each statement.

a)A reduction in the rate of money growth will reduce the rate of inflation.

b)The Federal Reserve should reduce the rate of money growth.

c)Society ought to require welfare recipients to look for jobs.

4)This problem is similar to Chapter 2 Problems and Applications 4. A detailed answer to that question is provided in the Fall 2019 Assignment 1 Answer Key available on thePast SemestersCanvas page linked on the bottom of the course homepage. (2 points each)

An economy consists of three workers: Alvin, Simon and Theodore.Each works 12 hours a day and can produce two services: painting fences and washing cars. In two hours, Alvin can either paint one fence or wash two cars. In three hours, Simon can either paint one fence or wash five cars. In four hours, Theodore can either paint four fences or wash one car. Assume Alvin, Simon, and Theodore all have linear production possibility frontiers.

a)Calculate how much of each service is produced under the following circumstances, which we label A, B, C, and D:

All three spend all their time painting fences. (A)

All three spend all their time washing cars. (B)

All three spend half their time on each activity. (C)

Alvin and Simon only wash cars and Theodore only paints fences. (D)

Simon only washes cars and Alvin and Theodore only paints fences. (E)

b)Graph the production possibility frontier for this economy using the points A, B, C, D, and E from the previous problem. Why is the PPF in this case, as is the general case, bowed out from the origin and not linear?

c)Are any of the points A, B, C, D, or E inefficient? Explain how you know each point is not efficient.

5)These problems are based on Chapter 3

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor.Assume that in China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor.

a)Which country has the absolute advantage in the production of aircraft and which country has the absolute advantage in the production of shirts?

b)Which country has the comparative advantage in the production of aircraft and which country has the comparative advantage in the production of shirts?

c)Assume the United States and China specialize and trade with each other. Describe which country imports aircraft, which country exports aircraft, which country imports shirts, and which country exports shirts.

6.These problems come from Chapter 3 Problems and Applications 6

The following table describes the production possibilities of two cities in the country of Baseballia:

Pairs of Red Socks Pairs of White Socks

per Worker per Hour per Worker per Hour

Boston 3 3

Chicago 2 1

a.Without trade, what is the price of a pair of white socks (in terms of red socks) in Boston.What is the price in Chicago?

b.What is the range of prices for a pair of white socks (in terms of red socks) at which trade can occur assuming Boston and Chicago agree to mutually beneficial trade?