Problem Set

1. Put away you pen and pencils2. Put your name and write “Graded by:”3. After grading each question, write in their

score in the blank. ex: ( ____/5)4. Follow the directions!!!

Don’t say “but what if it says?”The answers are specific.

Ex: If on a multiple choice the right answer is A, you wouldn’t ask…“but what if it says D?”

Directions

Question #1

5 Point Total 1 Point-Scarcity is the idea that we have unlimited

wants, but limited resources1 Point-Because we can’t have everything we are

forced to make choices1 Point-Tradeoffs are all the things given up when a

choice is made.1 Points- Every choice we make involves a tradeoff.1 Point- The answer is written in such a way that

shows that these concepts are interrelated. They do not get this point if they simply define these words without showing how they are linked.

Question #1A

Write in the score ex: ( ____/5)

Question #2

Question 2: Graph

The Graph: 5 Point Total(1point) The axis have numbers(1point) One axis is labeled “Trucks”(1point) The other axis is labeled “Cars”(1point) EVERY point is plotted

correctly(1point) ALL points are labeled

A,B,C,D,E,F,G

Write in the score ex: ( ____/5)

Question 2A5 Point Total 1 Point-At combo A, Ford is using all the

resources to make Trucks1 Point-At combo G, Ford is using all the

resources to make Cars 1 Point-Neither combo is desirable2 Points- Consumers likely want trucks and

cars. If Ford only makes one or the other they are going to loose profit. Combinations A and G are not allocatively efficient.

Question 2B5 Point Total 1 Point-Correctly plotted and labeled point

X at 20 cars and 40 trucks1 Point-Correctly plotted and labeled point

Y and 25 cars and 20 trucks1 Point- Combo X is unattainable because

there are not enough resources 1 Points- Combo Y is inefficient because

more of either goods can be produced without giving up the other.

1 Points- Explanations are clear and show that the students understands WHY the points are unattainable and inefficient.

Question 2C

Opportunity Cost (2 Points)1 Point- The PPF demonstrates opportunity

cost by showing exactly how much of a good is forgone when additional units of another good are being produced.

1 Point- Numeric example of opportunity cost

Question 2CEfficiency (3 Points)1 Point- Productive efficiency is demonstrated on

the PPF as points on the curve. These different combinations show that the economy is using all its resources to produce the maximum amount of products

1 Point- Example. Ex: Point D1 Point-Allocative efficiency involves making the

combination of goods most desired by society. This can be demonstrated by the PPF by moving along the curve towards optimal combinations determined by society.

Question 2C

Unemployment (2 Points)1 Point- Unemployment on the PPF is shown

by any point within the curve. These points show an inefficient use of resources since more of both goods can easily be produced without giving up more of either good.

1 Point- Numerical example inside curve

Question 2C

Law of Increasing opportunity Cost (2 Points)

1 Point- The law of increasing opportunity cost can be shown using a PPF by bowing out the curve away from the origin.

When the curve is bowed out, production of additional units of one good results in increasing losses in the production of the other good.

1 Point- Example showing that opportunity cost increase.

Question 2C

Economic Growth (2 Points)1 Point- If the graph were to shift outward

there would be economic growth because more of both goods could be produced

1 Point- Example describing how the PPC can shift outward do to a change in resources, technology, or trade.

Write in the total score on the top of the cover page.

Question #4

5 Point Total 1 Points- Correct definition of Law of Demand

(Inverse relationship between price and QUANTITY demanded)

1 Points- Example of Law of Demand1 Points- Correct definition of Law of Supply

(Direct relationship between price and QUANTITY supplied)

1 Points- Example of Law of Supply1 Points- Clarity of examples

1a. Laws of Demand and Supply

5 Point Total 2 Points- Correct definition of the Law of

Diminishing Marginal Utility(As you consume more of any good, the additional

satisfaction from each new unit will eventually start to decrease)

2 Points- Example of the Law 1 Points- Clarity of example

1b. Laws of Dim. Marg. Utility

5 Point Total 1 Points- Correct definition of normal good(when income increased, demand increases)1 Points- Example of normal good1 Points- Correct definition of inferior good(when income increased, demand decreases)1 Points- Example of inferior good1 Points- Clarity of examples

1c. Normal and Inferior

5 Point Total 1 Points- Correct definition of Consumers

Surplus(difference between the amount a buyer is

willing to pay and the price they do pay)1 Points- Example of CS1 Points- Correct definition of Producers

Surplus(difference between the price and the sellers

minimum price)1 Points- Example of PS1 Points- Clarity of examples

1d. Consumers and Producers Surplus

5a. S&D Study Guide5 Points Total

5 Point Total Note sheet: Demand and Supply

5 points if completed entirely. NO blanks.(exclude the second S&D graph on the back)

4 points if one graph or section blank3 points if two sections blank2 points if three sections blank1 point if four sections bank

2b. S&D Practice5 Points Total

5 Points Total (circle their mistake) 1. D decrease, P and Q decrease2. S decrease, P increase and Q decrease3. D increase, P and Q increase4. S decrease, P increase and Q decrease5. S decrease, P increase and Q decrease6. D increase, P and Q increase7. S increase, P decrease and Q increase8. D increase, P and Q increase 9. S decrease, P increase and Q decrease 10. No shift, surplus, P increase and Q decrease11. S increase, P decrease and Q increase12. S increase, P decrease and Q increase13. No shift, Ceiling below eq, P dec and Q dec14. S inc AND D inc, P Indeterminate and Q inc

5b. Practice Sheet