ECO 284 - Microeconomics by mifei

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```									ECO 285 - Macroeconomics         Your name: ______________________________
Mr. Eastwood - Spring 2004       List the other members of your group below:

The Virtue of Self Sufficiency:

Presidential candidate Dennis Kucinich wants to repeal NAFTA. Is this a good idea?
What do you think? Write down your ideas here before talking to the other members of

Now share your ideas with the other members of your group. What are their ideas?
Summarize them here:

Now, work with your group to analyze the following hypothetical economy. As our
story begins, it is a “closed” economy – it is entirely self-sufficient.

The story: The island nation of Avalon has a population of 100, all workers (they must
send their children and elderly elsewhere!). Each worker can be used to
produce/harvest 2 pounds of potatoes (per day), or sent to catch 4 fish (per day). Each
worker is the same in this regard. The minimum required level of consumption is 0.5
pounds of potatoes and 1 fish, per day. Use this information to answer these questions:

1. Can this society produce the minimum necessary to survive? Explain.

2. If everyone fishes, how many can they catch? What would be the big problem with
this outcome?

3. If everyone harvests potatoes, how much can they produce? What would be the big
problem with this outcome?

4. If this society produces the minimum amount of fish necessary, how many potatoes
can they produce?

5. Draw a graph showing the production possibilities that this society faces. [Show
potatoes on the vertical axis and fish on the horizontal axis.]

5b. Identify an equation for this line:

5c. What is the slope of this line?

5d. What does it cost these people when they catch one more fish?

5e. What does it cost these people when they harvest one more pound of
potatoes?

6. What do you note about the relationship between what is produced and what is
consumed?

7. If the people of Avalon like to consume potatoes and fish in a 1:1 ratio (that is, one
pound of potatoes with 1 fish ), what would be the “best” production mix? [You may
approximate this from your graph, or, if you have the two equations properly
identified, you can solve for it algebraically.]

What is the “standard of living” on Avalon, stated in terms of fish and potatoes per
worker?

8. If a politician promises to raise Avalon’s standard of living to 2 pounds of potatoes
and 2 fish per person (per day), would you vote for him? Explain.

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9. Now we will drop the requirement that Avalon be self-sufficient. There is a nearby
island, Hosk, with whom you may trade.
 Talk with them.
 Find out what they want and what they are willing to give in exchange.
 Try to reach an agreement that will raise your standard of living.

9a. What is your new production mix?
9b. What do you trade away (and how much)?
9c. How much do you get for what you trade away?
9d. What is your new standard of living?
9e. What do you now note about the relationship between what is produced and
what is consumed?

10. Review your initial answer candidate Dennis Kucinich’s proposal. Should the US
withdraw from NAFTA? Write down your conclusions:
ECO 285 - Macroeconomics         Your name: ______________________________
Mr. Eastwood - Spring 2004       List the other members of your group below:

The Virtue of Self Sufficiency:

Presidential candidate Dennis Kucinich wants to repeal NAFTA. Is this a good idea?
What do you think? Write down your ideas here before talking to the other members of

Now share your ideas with the other members of your group. What are their ideas?
Summarize them here:

Now, work with your group to analyze the following hypothetical economy. As our
story begins, it is a “closed” economy – it is entirely self-sufficient.

The story: The island nation of Hosk has a population of 100, all workers (they must
send their children and elderly elsewhere!). Each worker can be used to
produce/harvest 4 pounds of potatoes (per day), or sent to catch 2 fish (per day). Each
worker is the same in this regard. The minimum required level of consumption is 0.5
pounds of potatoes and 1 fish, per day. Use this information to answer these questions:

1. Can this society produce the minimum necessary to survive? Explain.

2. If everyone fishes, how many can they catch? What would be the big problem with
this outcome?

3. If everyone harvests potatoes, how much can they produce? What would be the big
problem with this outcome?

4. If this society produces the minimum amount of potatoes necessary, how many fish
can they catch?

5. Draw a graph showing the production possibilities that this society faces. [Show
potatoes on the vertical axis and fish on the horizontal axis.]

5b. Identify an equation for this line:

5c. What is the slope of this line?

5d. What does it cost these people when they catch one more fish?

5e. What does it cost these people when they harvest one more pound of
potatoes?

6. What do you note about the relationship between what is produced and what is
consumed?

7. If the people of Hosk like to consume potatoes and fish in a 1:1 ratio (that is, one
pound of potatoes with 1 fish ), what would be the “best” production mix? [You may
approximate this from your graph, or, if you have the two equations properly
identified, you can solve for it algebraically.]

What is the “standard of living” on Hosk, stated in terms of fish and potatoes per
worker?

8. If a politician promises to raise Hosk’s standard of living to 2 pounds of potatoes and
2 fish per person (per day), would you vote for him? Explain.

********************************************************************************************
9. Now we will drop the requirement that Hosk be self-sufficient. There is a nearby
island, Avalon, with whom you may trade.
 Talk with them.
 Find out what they want and what they are willing to give in exchange.
 Try to reach an agreement that will raise your standard of living.

9a. What is your new production mix?
9b. What do you trade away (and how much)?
9c. How much do you get for what you trade away?
9d. What is your new standard of living?
9e. What do you now note about the relationship between what is produced and
what is consumed?
10. Review your initial answer candidate Dennis Kucinich’s proposal. Should the US
withdraw from NAFTA? Write down your conclusions:
ECO 486 - International economics                             Homework Assignment #1:
Mr. Eastwood - Spring 2001                               Production Possibilities, Scarcity,

Due date: Thursday, January 18, in class

Assignment: Answer, in essay format, these two questions. Your response should be typed,
double-spaced with suitable margins and font size. Your answer to each question should be
no more than 250 words. Provide a word count with each answer (in MS Word, highlight the
passage and select Tools/Word Count to get this information)--failure to provide this
information, or an answer that is “too short” or “too long” (my judgment) carry a 25%
penalty.

I. How does it appear that potatoes and fish are distributed among the citizens of Avalon?
[Keep in mind that, generally, a person only engages in one activity.] Suppose that you are
assigned to catch fish. If you call in sick, how does that affect your consumption? Noting
this, comment on how strongly motivated (or not) you are to show up to work. What does
this tell you about the “incentive structure” to produce goods and services in this society?

II. This question must be obtained off of my web site. [Start at the home page; go to the

********************************************************************************************

ECO 486 - International economics                             Homework Assignment #1:
Mr. Eastwood - Spring 2001                               Production Possibilities, Scarcity,

Due date: Thursday, January 18, in class

Assignment: Answer, in essay format, these two questions. Your response should be typed,
double-spaced with suitable margins and font size. Your answer to each question should be
no more than 250 words. Provide a word count with each answer (in MS Word, highlight the
passage and select Tools/Word Count to get this information)--failure to provide this
information, or an answer that is “too short” or “too long” (my judgment) carry a 25%
penalty.

I. How does it appear that potatoes and fish are distributed among the citizens of Avalon?
[Keep in mind that, generally, a person only engages in one activity.] Suppose that you are
assigned to catch fish. If you call in sick, how does that affect your consumption? Noting
this, comment on how strongly motivated (or not) you are to show up to work. What does
this tell you about the “incentive structure” to produce goods and services in this society?

II. This question must be obtained off of my web site. [Start at the home page; go to the
Web page question:

Avalon resident
B. Now, let’s assume that there is a simple exchange process present in Avalon. Keep
in mind your answer to question #8. How many workers are engaged in harvesting
potatoes? Catching fish? As a fishing person, how many fish do you catch each day?
How much do you trade away? How many pounds of potatoes do you get in
exchange? Now, if you call in sick, how does that affect your consumption? Noting
this, comment on how strongly motivated (or not) you are to show up to work. What
society?

********************************************************************************************

Hosk resident
B. Now, let’s assume that there is a simple exchange process present in Hosk. Keep in
mind your answer to question #8. How many workers are engaged in harvesting
potatoes? Catching fish? As a potato farmer, how many pounds of potatoes do you
harvest each day? How much do you trade away? How many fish do you get in
exchange? Now, if you call in sick, how does that affect your consumption? Noting
this, comment on how strongly motivated (or not) you are to show up to work. What
society?
ECO 486 - International Economics                             Homework Assignment #1:
Mr. Eastwood - Spring 2001                               Production Possibilities, Scarcity,

Due date: Thursday, January 18, in class

Assignment: Answer, in essay format, these two questions. Your response should be typed,
double-spaced with suitable margins and font size. Your answer to each question should be
no more than 250 words. Provide a word count with each answer (in MS Word, highlight the
passage and select Tools/Word Count to get this information)--failure to provide this
information, or an answer that is “too short” or “too long” (my judgment) carry a 25%
penalty.

I. How does it appear that potatoes and fish are distributed among the citizens of Hosk?
[Keep in mind that, generally, a person only engages in one activity.] Suppose that you are
assigned to harvest potatoes. If you call in sick, how does that affect your consumption?
Noting this, comment on how strongly motivated (or not) you are to show up to work.
What does this tell you about the “incentive structure” to produce goods and services in
this society?

II. This question must be obtained off of my web site. [Start at the home page; go to the

********************************************************************************************

ECO 284 - Microeconomics                                      Homework Assignment #1:
Mr. Eastwood - Spring 2001                               Production Possibilities, Scarcity,

Due date: Thursday, January 18, in class

Assignment: Answer, in essay format, these two questions. Your response should be typed,
double-spaced with suitable margins and font size. Your answer to each question should be
no more than 250 words. Provide a word count with each answer (in MS Word, highlight the
passage and select Tools/Word Count to get this information)--failure to provide this
information, or an answer that is “too short” or “too long” (my judgment) carry a 25%
penalty.

I. How does it appear that potatoes and fish are distributed among the citizens of Hosk?
[Keep in mind that, generally, a person only engages in one activity.] Suppose that you are
assigned to harvest potatoes. If you call in sick, how does that affect your consumption?
Noting this, comment on how strongly motivated (or not) you are to show up to work.
What does this tell you about the “incentive structure” to produce goods and services in
this society?

II. This question must be obtained off of my web site. [Start at the home page; go to the