Question PART 1 Short Answer Questions (5 points each)

07 Jun Question PART 1 Short Answer Questions (5 points each)

Question
PART 1

Short Answer Questions

(5 points each)

1. Explain the factors of production and give an example for each one.

2. What is the difference between a normal good and an inferior good? How does this relate to the demand curve?

3. What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why do those consequences occur?

4. Briefly explain the three tax systems – proportional, progressive and regressive. As you explain each one, also compare the relationship between marginal tax rate and average tax rate as income rises for each one.

PROJECT AND ANALYSIS QUESTIONS
(POINTS LISTED BY EACH QUESTION)
5. Scans of internal organs using magnetic resonance imaging (MRI). These devices are often covered by subsidized health insurance programs such as Medicare. Consider the following table illustrating hypothetical quantities of individual MRI testing procedures demanded and supplied at various prices. Answer the following 3 questions

(4 points)

Price
Quantity Demanded

Quantity Supplied

$100

100,000

40,000

$300

90,000

60,000

$500

80,000

80,000

$700

70,000

100,000

$900

60,000

120,000

In the absence of a government-subsidized health plan, what is the equilibrium price and quantity of MRI tests?
Suppose that the government establishes a health plan guaranteeing that all qualified participants can purchase MRI tests at an effective price to the individual of $100 per test. How many MRI tests are now demanded? Is the result in the market a surplus or shortage?
6. The next 3 parts to this question give changes that have occurred in the watermelon market. For each change in a determinant given, draw in the change that would occur on the supply/demand graph for watermelons that is provided. Be sure and review what causes the curve to shift and what causes a movement along the curve as well as what determinants affect supply and what affect demand. Once you have drawn in your change, write a short explanation for each question discussing what would be the new equilibrium price and quantity levels because of this change. In other words, has equilibrium price or quantity increased, decreased or stayed the same, etc. If P or Q are indeterminate – meaning you cannot tell whether it would have changed or not – be sure and explain that. (To draw in changes on the graph, simply use the Drawing toolbar and use lines or arrows to draw in your shifts or show movement along for supply or demand.)

(6 points)

A. A new technology is adopted that allows production of watermelons to be increased substantially.

B. There is a substantial decrease in the price of cantaloupes. Cantaloupes are assumed to be a substitute good for watermelons.

C. Consumer’s income increases (assuming watermelon is a normal good) and the number of sellers producing watermelons increases.

P

7. In MyLabsPlus, go to Economic News. Then View the Latest News Update under Economics in the News. On the left hand menu, select News Archives by Topic. For this unit, select Government Intervention in Markets and then choose “Weakest Monsoon Season since 2009 to Shrink India Rice Harvest.”

Read and review the article and graph provided. Be sure and click on the link to read the full article. Then answer the 3 Thinking Critically Questions provided and provide your answers to those three questions in a short essay.

(6 points)

8. Using the historical tables from the Budget of the US government, utilize the following website to determine where the US government allocates its expenditures.

(6 points)

The website is http://www.whitehouse.gov/omb/budget/Historicals

Examine Table 3.1 on Outlays by Superfunction and Function. Consider what government functions have been capturing growing shares or declining shares of government spending in recent years.

Select one of the government functions and describe in a brief summary whether it has seen an increase or decrease in government spending over the past 10 to 15 years. For the function you have selected, is it related to the problem of addressing externalities, providing public goods or dealing with other market failures. Does it appear to be related to political functions instead of economic functions?

9. Find an article that identifies a change in supply and/or demand. Use the article to fulfill the following instructions and questions:

(8 points)

A. Copy and paste the article into your homework assignment. Be sure and cite your reference for where the article came from indicating the source, author, title, date, and page for the article you have chosen.

B. Find one example in the article of any one of the following four possible shifts of supply or demand: Leftward shift of the supply curve; Rightward shift of the supply curve. Leftward shift of the demand curve; Rightward shift of the demand curve.

Write a short summary addressing the following items:

· What shift occurred in either supply or demand.

· What determinant of demand or supply was changed that caused the shift. Describe the changes in the determinant that have occurred.

· Indicate evidence in the article of whether the market is an international, national, regional, or local market

· Indicate through whom (buyer or seller) the change in the determinant of demand or supply initially affects the market to cause the shift.

PART 2

Question 1

“If the United States enters a war in the Middle East, the economy will go into a recession” is an example of

Question 1 options:

A)

a positive statement.

B)

an easy to prove statement.

C)

a normative statement.

D)

a factual statement.

Save

Question 2(2 points)

Question 2 saved

Economic analysis is used

Question 2 options:

A)

only in economics classrooms.

B)

only by business people.

C)

only by policy makers.

D)

in all decision making.

Save

Question 3(2 points)

Question 3 saved

Economic models are used to

Question 3 options:

A)

simplify reality to predict outcomes.

B)

exactly replicate reality.

C)

predict all possible outcomes of a study.

D)

determine the thoughts of individuals.