For Carbonear/Burin/Lab-West & Happy Valley-Goose Bay Students

EC1140 Assignment 1 Due Wednesday, September 27, 2017 Instructor: [email protected] Chapters: 1,2

Directions: For Carbonear/Burin/Lab-West & Happy Valley-Goose Bay Students: i) Assignments are to be completed on separate paper! You can either type up the answers or write them on a sheet of paper. ii) For multiple choice questions, simply write the LETTER of the correct answer. iii) Once the assignment is complete, submit your assignment using the dropbox for EC1140 Microeconomics on dls.cna.nl.ca . The dropbox require an electronic version of your answers. In the past, students have used the cell phone app CamScanner to convert their document from a photo to a .pdf. DO NOT e-mail your assignments to your instructor.

For Grand Falls – Windsor Students: i) You may complete the assignment on this paper and circle the correct answer to multiple choice, or you have the option of doing it on separate paper. Assignments should be submitted to me on paper in- class or using the dropbox for EC1140 Microeconomics on dls.cna.nl.ca .

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) To earn people sell the services of the factors of production they own. Land earns ______and labour income, earns ______. A) wages; interest B) rent; minimum wage C) profit; wages D) profit; interest E) rent; wages

2) The study of how wages are set for New Brunswick teachers is classified as A) a macroeconomic topic. B) normative economics. C) economics of private interest. D) economics of social interest. E) a microeconomic topic.

3) The inescapable economic fact is that A) capitalists and unions cannot work together. B) capitalists are always exploiting the workers. C) unions are always exploiting firms. D) there are unlimited resources, and we just have to decide how to allocate them. E) there are unlimited wants and limited resources.

4) When government of Alberta chooses to build more roads, the required resources are no longer available the to provide better healthcare facilities. This situation illustrates the concept of A) opportunity cost. B) marginal benefit. C) entrepreneurs hip. D) monetary cost. E) human capital.

5) "The rich should face higher income tax rates than the poor." This is an example of A) economic reasoning. B) a positive statement. C) a normative statement. D) a negative statement. E) neither a normative nor a positive statement.

6) Which of the following is an example of a positive statement? A) Increasing the minimum wage results in more unemployment. B) Canada should have lower tax rates for wealthier Canadians. C) The Bank of Canada ought to cut the interest rate. D) Canada should cut back on its use of carbon-based fuels such as coal and oil. E) Every Canadian should have equal access to healthcare.

7) In among alternative models, economists generally have the strongest preference for models that choosing A) are detailed and complex, with every available fact and figure included. B) have few assumptions and are as simple as possible, even if they cannot predict very well. C) have assumptions that are complicated. D) have assumptions that are close to exact replicas of reality. E) predict better than any other that is available.

8) If Sam is producing at a point on his production possibilities frontier, then he A) cannot produce any more of either good. B) is not subject to scarcity. C) is unaffected by costs and technology. D) can produce more of both goods. E) can increase the production of one good only by decreasing the production of the other.

9) A clinic has 10 workers. Each worker can produce a maximum of either 2 units of medical services or 5 medical units of secretarial services a day. The production possibilities frontier of this firm would show A) constant opportunity cost. B) zero opportunity cost. C) increasing opportunity cost. D) infinite opportunity cost. E) decreasing opportunity cost.

Use the table below to answer the following questions.

Table 2.1.1 The following table gives points on the production possibilities frontier for goods X and Y.

10) Refer to Table 2.1.1. What does point C mean? A) If 28 units of Y are produced, then more than 8 units of X can be produced. B) If 8 units of X are produced, then at most 28 units of Y can be produced. C) If 8 units of X are produced, then at least 28 units of Y can be produced. D) If 8 units of X are produced, then only 36 units of Y can be produced. E) There is unemployment at this point.

11) Suppose destroys many millions of acres of valuable Canadian farmland. The effect on the Canadian economy drought would be to move A) its production possibilities boundary outward. B) it beyond its production possibilities boundary. C) its production possibilities boundary inward. D) it along its production possibilities boundary. E) None of the above. There would be no change in Canada's production possibilities boundary.

12) With regard to various economic systems, most economists agree that A) most and consumption decisions are more efficiently coordinated by markets than through central production planning. B) the mix of market and command principles that exists in Canada is the best. C) command economies have been very successful in distributing income in socially just ways. D) government intervention in the economy is only justified in time of war. E) the optimal mix of market and command systems remains constant over time.

13) Suppose l wheat farmer's income is influenced by the region's average daily temperature. When examining an the determinants of individual farmer income, the average daily temperature is a(n) ______individua variable. A) endogenous B) induced C) exogenous D) dependent E) flow

14) Suppose predicts that lowering tuition fees at Canadian universities will increase enrollment from low- a theory income households. If empirical evidence is inconsistent with this prediction, then we A) should test the theory again. B) need to amend the theory. C) should increase tuition fees back to their initial level. D) should change the empirical data. E) change the exogenous variables in the theory.

The table below shows hypothetical tuition costs at a Canadian university.

Year Tuition 2012 $5000 2013 $5050 2014 $5100 2015 $5150 2016 $5200

TABLE 2-1

15) Refer to 1. Assume that 2012 is used as the base year, with the index number = 100. The value of the index Table 2- number in 2014 is calculated as follows: A) 5100/5100 = 100. B) (5100/5000) × 100 = 102. C) 5000/5100 = 0.98. D) 5100/5000 = 1.02. E) (5000/5100) × 100 = 98.

16) The base year for an index number is A) dependant upon the type of data. B) chosen arbitrarily by those who construct the data. C) determined by the year the variable equals exactly 100. D) declared by the federal government. E) the year in which 2 or more index numbers are equal to 100.

With a budget of $200 million, the government can choose to purchase 4 helicopters or repair 200 km of highway.

FIGURE 1-1

17) Refer to Figure 1-1. For the government, the opportunity cost of one search and rescue helicopter is A) 100 kilometres of highway repair. B) 0 kilometres of highway repair. C) 200 kilometres of highway repair. D) 50 kilometres of highway repair. E) 150 kilometres of highway repair.

Use the table below to answer the following questions.

Table 2.1.1 The following table gives points on the production possibilities frontier for goods X and Y.

18) Refer to Table 2.1.1. The opportunity cost of increasing the production of X from 8 to 12 units is A) 4 units of Y. B) 16 units of Y. C) 4 units of X. D) 8 units of Y. E) 12 units of Y.

Problem.

B el o w is th e pr o d u ct (a) Use the information in the Table to draw the production possibilities curve (PP1) for Nigella. io Put tanks on the horizontal axis. n (b) Can Nigella produce 15 pizzas and 7 tanks? What concept does this illustrate? p (c) What is the cost to Nigella of moving from point A to point B on its PP1? os (d) What is the cost to Nigella of moving from point E to point F? si (e) What general economic principle is being illustrated by your answers to part (c) and (d) bi above? Explain. lit (f) Suppose there is a technological advancement in the production of pizzas where Nigella can ie produce 3 more pizzas at each point on its curve than it could before. Draw this on your s diagram from part (a) and label it PP2. ta (g) After this improvement, can Nigella produce 15 pizzas and 7 tanks? bl e fo r th e c o u nt ry of Ni g el la .