Explain why each of the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.
112-A1-1. You have been given a pass (with no resale value) to a Taylor Swift concert (OMG!). That same night you could either; binge-watch Game of Thrones, go to a party with friends, or do your Econ homework - valued at $20.00, $30.00, and $0.05 respectively. The opportunity cost of going to the concert is $50.05.
112-A1-2. In an economy that produces only guns and butter, the opportunity cost of butter increases as more of it is produced.
112-A1-3. Suppose that Ontario can produce maple syrup for $5.00/pint or electric power for $0.10/Kwh, while Quebec can produce syrup for $4.00 or power for $0.05. Quebec has an absolute and comparative advantage in the production of both goods.
112-A1-4. The data in 112A1-3 tells us that trading syrup from Ontario to Quebec at a price of 60 Kwh of electricity per pint of syrup will make both provinces better off.
112-A1-5. Over the past few months the price of crude oil has fallen approximately 50% due to an increase in world oil supply. At some point this will lead to a decrease in the price of plastic. [Hint: Crude oil is an input to the production of plastic.]
Explain why each of the following statements is True, False, or Uncertain according to economic principles. Use diagrams where appropriate. Unsupported answers will receive no marks. It is the explanation that is important.
112-A1-1. You have been given a pass (with no resale value) to a Taylor Swift concert (OMG!). That same night you could either; binge-watch Game of Thrones, go to a party with friends, or do your Econ homework - valued at $20.00, $30.00, and $0.05 respectively. The opportunity cost of going to the concert is $50.05.
112-A1-2. In an economy that produces only guns and butter, the opportunity cost of butter increases as more of it is produced.
112-A1-3. Suppose that Ontario can produce maple syrup for $5.00/pint or electric power for $0.10/Kwh, while Quebec can produce syrup for $4.00 or power for $0.05. Quebec has an absolute and comparative advantage in the production of both goods.
112-A1-4. The data in 112A1-3 tells us that trading syrup from Ontario to Quebec at a price of 60 Kwh of electricity per pint of syrup will make both provinces better off.
112-A1-5. Over the past few months the price of crude oil has fallen approximately 50% due to an increase in world oil supply. At some point this will lead to a decrease in the price of plastic. [Hint: Crude oil is an input to the production of plastic.]
