Unit I: Fundamental Principles
-228600-560705_____/24_____/26_____/20_____/20_____/10_____/10Total: /11000_____/24_____/26_____/20_____/20_____/10_____/10Total: /110AP Macro Unit 1: Basic Economic ConceptsProblem Set #1 Complete each of the following tasks with short paragraphs:Explain the relationship between scarcity, choices, and trade-offs (____/5)Differentiate between the following terms: price, costs, and opportunity cost (____/4)Fully explain the difference between the following (USE EXAMPLES): Consumer Goods and Capital Goods (____/3)Normative and Positive Economics (____/3)Allocative and Productive Efficiency (_____/3)Free-Market and Centrally Planned Economies (_____/3) Resource Markets and Product Markets (____/3)Draw Production Possibilities Graph for the Ford Motor Co. using the following information. Points A – G should be plotted from left to right. (____/5ABCDEFG Cars0101825303335Trucks4542393325150What are the consequences of Ford producing at combination A? Combination G? In reality, is either combination desirable? Why? Why not? (____/5)Plot the combination with 20 cars and 40 trucks and label it “X.” Plot the combination with 25 cars and 20 trucks and label it “Y.” Explain what is happening at these points? (____/5) EXPLAIN, with specific EXAMPLES, how your graph shows the following 5 concepts: Opportunity costs:Efficiency:Unemployment:Law of increasing opportunity costs:Economic growth. (____/11)Use the PPF-A and PPF-B to answer the following questions:5080019558000On PPF-A, what is the opportunity cost from point a to b in terms of guns? What about moving from b to c? What generalizations can you make? (____/5)On PPF-B, what is the opportunity cost from point a to b in terms of guns? What is the PER UNIT OPPORTUNITY COST from moving from c to e? What generalizations can you make? (____/5)Which PPF shows increasing opportunity costs? Use numerical examples to explain why? (____/5)Fully explain three specific situations that would shift PPF-B outward. Why do they shift? Draw and label these changes on three separate graphs. (____/5) EXPLAIN an experience or example that shows the “real world” application of each of the following. Define the terms in your own words and use examples that clearly demonstrate your understanding of each concept. The Law of Demand and the Law of Supply ( ____/5)The Law of Diminishing Marginal Utility ( ____/5)Normal Goods and Inferior Goods ( ____/5)Double Shifts and their Effects on Price & Quantity ( ____/5)FRQ ( ____/10)Assume that countries Rayland and Artland have equal amounts of resources that are highly adaptable to the production of hats and bicycles. Rayland can produce 1,200 hats or 300 bicycles or any combination. Artland can produce 600 hats or 300 bicycles or any combination.(a) Graph a production possibilities frontier for each of the two countries.(b) Which country has the absolute advantage in hats? Explain.(c) Which country has the comparative advantage in bicycles? Explain. (d) If the two countries specialize and trade, which country will import bicycles? Explain. (e) If the terms of trade are 5 hats for 1 bicycle, would trade be advantageous for each of the following? (i) Artland (ii) Rayland (f) Show the results of specialization and trade on each of the production possibilities frontiers you drew in question a. In addition, BRIEFLY explain the changes to the curve. Complete Unit 1 Study Guide ( ____/10) ................
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