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Econ 251
Spring 2016
Hartmann
Worksheet 1
Due Date: TBA Please turn in your answers into my mailbox in OEC 436 or under my office door (OEC 402) by 6
p.m. on the day it is due. See syllabus for how I grade homework assignments.
Your answers must be written neatly on another sheet or typed up.
1.
Identify the economic term(s) to complete the sentence.
“Sales of the new iPhone could add between a quarter and a half of a percentage point to the annualized
rate of economic growth in the fourth quarter, J.P. Morgan Chase & Co.'s chief U.S. economist Michael
Feroli estimates. That could help cushion the sluggish U.S. economy from other risks in the final months of the
year. .. The new iPhone sales could boost GDP by $3.2 billion in the fourth quarter, or $12.8 billion at an
annual rate. …” (Source: Wall Street Journal 9/11/12) The author of this article committed the______ fallacy.
2.
Identify the relevant economic term(s) being discussed in the passage (1-2 words)
__________________ Although some students see the tunnels as a convenience, Anderley said they would
come at a steep cost. “We’ve looked into extending the tunnel system, but under this economy, to put that much
money into tunnels and take it away from academic programs doesn’t make a whole lot of sense,” Anderley
said. (Excerpt from TommieMedia “Underground tunnels for new buildings not in university’s plans” 2/28/12)
3.
(Chp. 2) Tina and Julia are partners in two businesses: salsa production and computer-designed advertisements.
The table below shows what each of them can do in a one week. For example, Tina can produce 50 jars of salsa
if she spends her entire week working solely on making salsa or 10 ads in one week if she spends her time only
making advertisements.
Tina
Julia
Salsa
Ads
Salsa
Ads
50
0
50
0
0
10
0
5
a.
What is Tina’s opportunity cost of making one jar of salsa? Julia’s OC? Show work.
b.
What is Tina’s opportunity cost of making one advertisement? Julia’s OC? Show work.
c.
What task(s) would you assign each of them? Explain why using economic analysis.
d.
Based on your answer to (c), what is the total amount of Salsa and Ads, respectively, will Tina and Julia
collectively make of each good?
e.
Suppose Tina and Julia have a falling out and are no longer business partners and refuse to trade with each
other. For simplicity assume each person spends half of her time on producing each type of good. Then
what is the total amount of Salsa and Ads, respectively, will Tina and Julia collectively make of each? Is
this greater than, less than, or equal to your answer to (d)?
4.
(Chp. 2) When traveling through Nicaragua this past summer, I learned if you want to purchase pottery, you
should visit San Juan De Oriente. If you want to purchase flowers, visit Katarta, but if you want to bring back a
hammock, you should drive to Tipitapa City. Why I was not surprised to hear that each city specializes in
production of one item? Explain using macroeconomic concepts. (2-3 sentences)
5.
(Chp. 2) Every economic system must determine what goods and services will be produced, what prices will be
charged for these goods and services, and how one allocates resources to produce these goods and services. To
test your understanding of different economic systems, match the economic system (capitalism, or communism)
with the proper description. (Yes, this question is based on the “cow” joke you may have read..)
a. ______________ You have two cows. Give both cows to the government, and the government
may give you some milk.
b. ______________ You have two cows. Sell one and buy a bull.
6.
(Chp. 2) The Central Bank of Brazil has been raising its interest rates to deter household spending. Why would
Brazil do this during a world-wide recession? What are they worried about? Explain. (1-2 sentences)
7.
(Chp. 4) How do the following scenarios affect the price and quantity sold of oil on the world market? Use
basic demand and supply analysis. Label all graphs, axes, & shifts.
a)
b)
c)
d)
e)
8.
Tax credits were offered for expenditures on home insulation.
The Alaskan oil pipeline was completed.
The ceiling on the price of oil was removed. Assume the ceiling is set below equilibrium levels.
Oil was discovered in the North Sea.
Sport utility vehicles and minivans became popular.
(Chp. 4) Now let us look at an example inspired by an article written by Eric Roper for the Minneapolis Star
Tribune on September 19th, 2015: “Global shifts put squeeze on Twin Cities recycling.”
The article tells us about the global market for recycled materials in 2015:
The falling price for recyclable materials, coupled with changes in what people are recycling, is putting a
financial strain on processors and creating uncertainty about the future taxpayer costs for recycling
programs. It also underscores how the blue bins that pepper alleys and curbs across the Twin Cities are
deeply entangled in the whims of the global economy.
The article offers some possible explanations for why global shifts have led to a squeeze:
The switch to single-sort recycling across the metro area has made the process easier than ever for residents,
[thereby increasing the amount people recycle] …
[. . .] Ultralow oil prices have made it cheaper to produce goods from new instead of recycled plastic. There
is also less demand from recycling powerhouse China, which is experiencing a slowdown and has become
pickier about the quality of the materials it imports.
We want to consider two different market changes (shifts) from this information (one for Demand and one for
Supply). (Hint: be careful in your analysis when deciding which parties are the suppliers of recycled material and
which one are the demanders of recycled materials.) Assume both market shifts occur simultaneously.
Show graphically how these two market changes (shifts) affect the price and quantity of recycled materials sold?
Answer using a supply and demand graph for the recycled materials market.
BONUS: Points will be awarded based on the quality of your economic analysis. You may work on the bonus
with 1 other students. Just turn in one typed write-up of the bonus question for the entire group. The bonus
point(s) will go toward the first midterm. You may answer up to TWO bonus questions. Due date: March 1
Bonus responses must be typed to be considered.
A. Make up your own comparative advantage problem based on your everyday life. Make sure you provide
enough information for someone to understand your analysis.
B. Provide an example in the news, in any textbook, a friend’s comments, etc. where the author is
committing a fallacy of composition. Provide sufficient details so that someone else would also agree
that this person is committing this fallacy.
C. Provide an example in the news, textbook, a friend’s comments, etc. where the author is committing a
post hoc fallacy. Provide sufficient details so that someone else would also agree that this person is
committing this fallacy.
Optional old exam questions to test your understanding of the material: Do not turn in for credit. See me in office
hours or after class if you have any questions on these problems.

You should be able to answer end of chapter questions in chapter 4 of McEachern.

President Bush just announced that he would impose a 30% tariff on a wide range of imported steel products.
Let us now examine the impact this is expected to have on various individual markets in the United States.
(Source: various editions of The Economist, Star Tribune, and New York Times 3/5/02.)
i.
Using a graph, show the impact tariffs will have on equilibrium price and quantity of U.S. steel.
Explain why there is a shift or movement of the curve(s). (1-2 sentences are sufficient
ii.
Using a graph, show the impact tariffs will have on equilibrium price and quantity of U.S.
automotives. Explain why there is a shift or movement of the curve(s). (1-2 sentences)