The chart shows the marginal cost of producing apple pies

1. Assume that the economy has just come out of a severe recession, and growth is booming. The labor force is growing because many unemployed people who thought they could not find a job during the recession now think they can and have started to apply for work. But, not all of these people find a job immediately. What do you think will happen to the unemployment rate this month?

2. The following table shows the hourly output per worker measured as quarts of olive oil and pounds of pasta in Greece and

Italy:

Output per Hour of Work
Olive Oil

Pasta

Greece

6

3

Italy

6

12

The opportunity cost of producing one more quart of olive oil in Greece is pounds of pasta. (Enter your

response rounded to two decimal places.)
The opportunity cost of producing one more quart of olive oil in Italy is pounds of pasta. (Enter your

response rounded to two decimal places.)
The opportunity cost of producing one more pound of pasta in Greece is quarts of olive oil. (Enter your

response rounded to two decimal places.)
The opportunity cost of producing one more pound of pasta in Italy is quarts of olive oil. (Enter your response rounded to two decimal places.)

3. The table below shows the hourly output per worker in two industries in Chile and Argentina. Use this table to answer the following questions.

(1)

Argentina

Chile

(2)

Argentina

Chile

(3)

Argentina

Chile

(4)

Argentina

Chile

Hats

Beer

Chile

6

0

0

Argentina

6

0

0

Output per hour of work
Hats

Beer

Chile

10

6

Argentina

1

2

a. (1) has an absolute advantage in the production of hats, and (2) has an absolute advantage in the production of beer.

b. (3) has a comparative advantage in the production of hats, and (4) has a comparative advantage in the production of beer.

c. Suppose that Chile and Argentina currently do not trade with each other. Each has 1,000 hours of labor to use for producing hats and beer, and the countries are currently producing the amounts of each good shown in the table below. Using this information, give a numerical example of how Chile and Argentina can both gain from complete specialization and trade. Assume that after trading begins, one hat can be exchanged for one barrel of beer.

Hats

Beer

Chile

9,000

600

Argentina

600

800

Complete the table below. The table represents the amount of hats and beer after trading for each country (enter your responses as integer values).

4. The figure to the right illustrates the trade-offs facing Ford Motor Company. The line in the graph is Ford's production possibilities frontier.

0

1

2

3

4

5

6

7

8

9

10

11

12

13

14

0

1

2

3

4

5

6

7

8

9

10

11

12

Quantity of cars (1,000s per day)

Quantity of trucks (1,000s per day)

P

P

F

If Ford uses all its resources to produce trucks, how many

can it produce? thousand trucks per day.  

(Enter a numeric response using a real number rounded to one decimal place.)
Suppose Ford is currently building 6 thousand cars per day. To build an additional 1 thousand cars, how many fewer

trucks can be built? thousand fewer trucks

per day.

According to the graph, building 3 thousand cars per day

and 3 thousand trucks per day is (1) .

(1)

technically inefficient

technically efficient

unattainable

5. In an economy, the working-age population is 100 million. Of this total,

80 million workers are employed.

3 million workers are unemployed.

14 million workers are not available for work (homemakers, full-time students, etc.).

2 million workers are available for work but are discouraged and thus are not seeking work.

1 million workers are available for work but are not currently seeking work due to transportation or childcare problems.

The unemployment rate in this economy is %. (Round your answer to one decimal place.)

6. Over the past few years, the supply of oil and gas has been increasing because of various technological advancements. However, because of the COVID-19 pandemic, the demand for oil and gas has decreased dramatically since there has been less far fewer cars on the road, less air traffic, and less production. Using your understanding of supply and demand, explain what is likely to happen to the equilibrium price and quantity of oil and gas because of these two events. Be sure to graph the supply and demand showing the before and after curves- and before and after equilibrium points.

7.

Using the information in the figure to the

right,

calculate the

percentage change in auto sales from

to

.

2

0

0

1

2

0

0

2

The percentage change in auto sales from

to

is

equal to

%.

Enter

(

your response as a real

number rounded to one decimal

place.)

2

0

0

1

2

0

0

2

2000

2001

2002

2003

2004

2005

2006

6.6

6.7

6.8

6.9

7

7.1

7.2

7.3

7.4

7.5

Car sales (millions)

8. What is marginal benefit? What is marginal cost? Cite three examples of recent decisions that you made in which you, at least implicitly, weighed marginal cost and marginal benefit.

9. Explain the difference between Gross Domestic Product (GDP) and Gross National Product (GNP). Provide examples.

10. The monthly market basket for consumers consists of pizza, t-shirts, and rent.  

The table below shows market basket quantities and prices for the base year (Year 1) and in the following two years.

Product

Base Year (Year 1) Quantity

Price in the Base Year

Price in Year 2

Price in Year 3

Pizza

15

$3.50

$4.38

$4.73

T-Shirts

4

$25.00

$22.50

$25.00

Rent

1

$300.00

$330.00

$360.00

%. (Round both answers to one decimal place.)

The inflation rate between Year 1 and Year 2 is

The inflation rate between Year 2 and Year 3 is

%.

11. Following below are four graphs and four market scenarios, each of which would cause either a movement along the supply curve for premium bottled water or a shift of the supply curve.

Match each scenario with the appropriate diagram.

a. A decrease in the supply of sports drinks:  (1) .

b. A drop in the average household income in the United States from $56,000 to $52,000: (2) .

c. An improvement in the bottling technology for premium bottled water: (3)

d. An increase in the prices of electrolytes used in premium bottled water: (4)

.

.

12. A simple economy produces two goods, Apple Pies and Technical Manuals. Price and quantity data are as follows:

Production and Prices in Year 1 (Base year)
Product Quantity Price Per Unit

Apple Pies 105

$3.00

Technical Manuals 750

$50.00

Production and Prices in Year 2

Product

Quantity

Price Per Unit

Apple Pies

131.25

$4.50

Technical Manuals

1,125.00

$100.00

(1)

surplus

shortage

14. Consider the macroeconomic data provided in the table below. Explain why nominal GDP would grow when real GDP is not growing.

Type of GDP

GDP in 2017

GDP in 2018

Nominal GDP

$10 trillion

$11 trillion

Real GDP

$10 trillion

$10 trillion