Download Part I (20 points): Matching

ECON 2105
Home Work #1
Chapters 1 – 4
Part I (20 points): Matching
Match the correct definition to the word or phrase below
1. F
5. J
2. K
6. B
3. G
7. A
4. I
8. E
Answers
9. C
10. H
Part II (25 points):
True/False, Explain: State whether the following statements are true or false and explain
why in one sentence.
1. False: The government has many roles to play in a market economy. For one, it
must set and enforce the rules to ensure transactions are secure. The government
is also a large purchaser of goods and services.
2. False: Feudalism solved the three coordination problems by relying on tradition
while mercantilism solved the three coordination problems by relying on
government intervention.
3. False: Trade is potentially beneficial whenever one country can produce a good at
lower opportunity cost than another country (comparative advantage is more
important than absolute advantage).
4. True: The law of supply depends on opportunity cost. The higher the price of a
good the higher the profits (ceteris paribus) and, hence, the higher the foregone
benefits of not producing the good.
5. True: Capitalist economies rely on the market mechanism. For the market
mechanism to function people must be able to rely on secure property rights
before they engage in exchange.
Part II (30 points): Multiple Choice
1. A
5. D
9. D
2. A
6. C
10. A
3. D
7. A
4. B
8. C
Part IV (25 points) Using Graphs
Price per Bar ($)
Ice Cream Demand
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Ice Cream
Demand
0
200 400 600 800 1000 1200
Ice Cream Bars
2. 0.05/-90 = - 0.00555
3. 0.15/-38 = - 0.003947
4. There is a negative relationship
between the price of ice cream bars and
quantity demanded.
5. You could have mentioned any shifter
of demand such as income, the
availability or price of substitutes or
compliments or outside temperature.