Economics 101Spring 2001Section 4 - HallamProblem Set #1Due date: January 22, 20011. Give 2 examples of each of the following types of inputs for a producer who is making computer tables,monitor stands, and chairs for use in home offices.a. capitalb. expendablec. capital service2. Consider the following decision situations. In each identify the opportunity cost of each of the alternativechoices.a. A lawyer who is deciding whether to take a case defending an indigent terrorist who will pay nothing butwill bring a lot of publicity to the lawyer’s firm, or to take a rather routine but expensive divorce case thatpromises a huge fee but little publicity for the firm.b. A middle-aged woman who is deciding whether to rent a duplex she owns out on the market for $750 amonth or to let her newly married son live in it for $200 a month.c. A business man who has a yard and lawn service who is deciding whether to operate his business foranother year with expected net returns of $70,000 or lease the business to his son in law for $40,000 a yearand work as a handy man in the condominium association for $20,000 per year.d. A student who is considering a full time job for the coming year at $19,000 and cutting back on his hoursof credit from 16 per semester to 10 per semester. An alternative part time job compatible with 16 credithours pays $7,000 per year.e. A car manufacturer who is considering increasing the output of light trucks and SUVs with the samenumber of workers and assembly lines.4. Which of the following situations is better for the consumer?a. Income of $20,000 per year with a market basket of goods priced at $50.00 orincome of $35,000 per year with a market basket of goods priced at $70.00.b. Income of 1,000,000 yen per year with a market basket of goods priced at 8000 yen orincome of $50,000 per year with a market basket of goods priced at $500.c. Income of $60,000 per year with a market basket of goods priced at $150 orincome of $200,000 per year with a market basket of goods priced at $400.4. Draw a production possibility frontier (boundary of P(x)) fora. The case where there is increasing opportunity costb. The case where there is constant opportunity cost5. Give an example of a production possibility frontier (boundary of P(x)) fora. The case where there is increasing opportunity costb. The case where there is constant opportunity costFor each case explain the shape of the boundary of P(x).6. Robinson Crusoe and Man Friday live on an island. The following table represents their output in a day ofwork.Fish CassavaRobinson Crusoe 5 20Man Friday 8 24a. Who has an absolute advantage in the production of fish?b. Who has an absolute advantage in the production of cassava?c. Who has a comparative advantage in digging cassava?d. Who has a comparative advantage in fishing?7. Consider the following data.Tennis Shoes Basketball Shoes43 042 740 1336 1830 2222 2512 27028a. On a piece of graph paper draw the production possibility frontier.b. What is the opportunity cost of 6 more tennis shoes when the firm is already producing 30?c. What is the opportunity cost of 2 more tennis shoes when the firm is already producing 40?d. What is the opportunity cost of 8 more tennis shoes when the firm is already producing 22?e. What is happening to the opportunity cost of tennis shoes as the quantity produced goes up?8. Work Skills and Tools problem 1-1 in the study guide.9. Work Skills and Tools problem 1-2 in the study guide.10. Work Skills and Tools problem 1-3 in the study guide.11. Work Skills and Tools problem 2-1 in the study guide.12. Work Skills and Tools problem 2-2 in the study guide.13. Work Skills and Tools problem 2-5 in the study guide.On skills and tools problems, do the work on another sheet of paper, or make a photocopy of the pages of theworkbook to turn
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