Problem Set #1 DUE: Directions: complete problem set on separate paper. Must be hand written. Follow the same numbering (1A, IB, 1Ci, etc). This paper must be turned in with problem set. THIS IS NOT JUST A RUBRIC...THERE ARE MANY QUESTIONS TO ANSWER! 1. Complete each of the following tasks with short paragraphs: A. Explain the relationship between scarcity, choices, and trade-offs ( 13) B. Differentiate between the following terms: price, costs, and opportunity cost 13 ) C. Fully explain the difference between the following (USE EXAMPLES): 1 . Consumer Goods and Capital Goods( 13 ) ii. Normative and Positive Economics 13) ili. Allocation and Productive Efficiency( 13 ) iv . Free-Market and Centrally Planned Economies ( 13 ) V . Resource Markets and Product Markets ( /3) 2. Draw Production Possibilities Graph for the Ford Motor Co. using the following information: ( 15 A B C D E F G Cars 0 10 18 25 30 33 35 Trucks 45 42 39 33 25 15 0 A. What are the consequences of Ford producing at combination A? Combination G? In reality, are either combinations desirable? Why? Why not? ( 15) B. Plot the combination with 20 cars and 40 trucks and label it "X." Plot the combination with 25 cars and 20 trucks and label it "Y." Explain what is happening at these points? ( /4) C. Explain, with examples, how your graph shows 5 concepts: opportunity costs, efficiency, unemployment, the law of increasing opportunity costs, and economic growth. ( /15) 3. Use the PPF-A and PPF-B on the back of this paper to answer the following: A. On PPF-A, what is the opportunity cost from point a to b in terms of guns? What about moving from b to c? What generalizations can you make? ( /5) B. On PPF-B, what is the opportunity cost from point a to b in terms of guns? What is the PER UNIT OPPORTUNITY COST from moving from c to e? ( /4) C. Which PPF shows increasing opportunity costs? Use numerical examples to explain why? ( 15) D. Fully explain three specific situations that would shift PPF-B outward. Draw and label these changes on three separate graphs.( 4. EXPLAIN an experience or example that shows the "real world" application of each of the following. Define the terms in your own words and use examples that clearly demonstrate your understanding of each concept. A. The Law of Demand and the Law of Supply (_ 15) B. The Law of Diminishing Marginal Utility ( 15) C. Normal Goods and Inferior Goods (_ 15) D. Substitutes and Complements (_ 15 ) 5. Supply and Demand Worksheets a. Complete the study guide entitled "Demand and Supply Study Guide" (_ 15) b. Complete the worksheet entitled "Demand and Supply Practice" ( /5)