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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.