Recitation Problem Set #11. Suppose that you prefer reading a book you already own to watching TV and thatyou prefer watching TV to listening to music. If these are your only three choices, what is the opportunity cost of reading?a. watching TV and listening to musicb. watching TVc. listening to musicd. sleepinge. the price of the book2. Which of the following statements is/are normative? I. The price of gasoline is rising. II. The price of gasoline is too high. III. Gas prices are expected to fall in the near future.a. I onlyb. II onlyc. III onlyd. I and II onlye. I, II and III3. The “other things equal” assumption allows economists toa. avoid making assumptions about reality.b. focus on the effects of only one change at a time.c. oversimplify.d. allow nothing to change in their model.e. reflect all aspects of the real world in their model.4. Refer to the graph above to answer the following questions.(1) Which point(s) on the graph represent efficiency in production?a. B and Cb. A and Dc. A, B, C, and Dd. A, B, C, D, and Ee. A, B, C, D, E, and F(2) For this economy, an increase in the quantity of capital goods produced without a corresponding decrease in the quantity of consumer goods produceda. cannot happen because there is always an opportunity cost.b. is represented by a movement from point E to point A.c. is represented by a movement from point C to point B.d. is represented by a movement from point E to point B.e. is only possible with an increase in resources or technology(3) An increase in unemployment could be represented by a movement from pointa. D to point C.b. B to point A.c. C to point F.d. B to point E.e. E to point B.(4) Which of the following might allow this economy to move from point B to point F?a. more workersb. discovery of new resourcesc. building new factoriesd. technological advancese. all of the above(5) This production possibilities curve shows the trade-off between consumer goods and capital goods. Since capital goods are a resource, an increase in the production of capital goods today will increase the economy’s production possibilities in the future. Therefore, all other things equal(ceteris paribus), producing at which point today will result in the largest outward shift of the PPC in the future?a. Ab. Bc. Cd. De. E5. Refer to the graph below to answer the following questions.(1) Use the graph to determine which country has an absolute advantage in producing each good.A(2) For country A, the opportunity cost of a bushel of wheat isa. ½ units of textilesb. ⅔ units of textilesc. 1⅓ units of textilesd. 1½ units of textilese. 2 units of textiles OC(a)= T/W=100/200=1/2 textile per bushel of wheatOC(a)=W/T=200/100=2 bushels of wheat per textiles OC(b)=150/100=3/2=1.5 textiles per bushels of wheat OC(b)=100/150=2/3 bushels of wheat per textiles(3) Use the graph to determine which country has a comparative advantage in producing each good.A(4) If the two countries specialize and trade, which of the choices below describes the countries’ imports?D import what you make less of and export what you make more of(5) What is the highest price Country B is willing to pay to buy wheat from Country A?a. ½ units of textilesb. ⅔ units of textilesc. 1 unit of textilesd. 1½ units of textilese. 2 units of textiles6. Which of the following would increase demand for a normal good? A decrease ina. price. –along the curveb. income. –shifter (decrease)c. the price of a substitute.- shifter (decrease)d. consumer taste for a good. – shifter (decrease)e. the price of a complement.7. If an increase in income leads to a decrease in demand, the good isa. a complement.b. a substitute.c. inferior.- something buy less of when you get richer (like ramen)d. abnormal.e. normal.8. Draw a correctly labeled graph showing the market for oranges in equilibrium. Show on your graph how a hurricane that destroys large numbers of orange groves in Florida will affect supply and demand, if at