To the Instructor:
Having created homework assignments from the discussion questions, review questions, and exercises printed in Microeconomics in Context (Goodwin et al, 2nd edition) in the Fall of 2007, in the Spring of 2009 I wanted to give my students a different set of exercises. What follows are the new homework assignments I created on material from chapters 1-12. In a few cases, the questions are taken from the (on-line) Instructors Resource Manual for the textbook, but most are newly written.
A note on the appropriateness of these materials: The University of Massachusetts Boston, where I teach, draws a population of mostly non-elite and often under-prepared students from a wide range of ages and backgrounds. Many are recent immigrants. While some bring fascinating life experiences to class, many of them need simple explanations and lots of review to master concepts, and many start the class intellectually disengaged from all but the most personally-related economic issues. If you teach a more elite or engaged group, you may find these exercises too simple or repetitive.
A note on teaching strategy: In order to give students immediate feedback on how they were doing—and ease my grading load!—I instructed students to always complete the assignments in blue or black ink, or pencil. Then I passed out pens with green ink in class, projected the answers and point (or "circle") values (as annotated in some of the answer notes) onto a screen, and had students "pre-grade" their work in green before passing in their papers and the pens. This seemed to work pretty well.
I actually taught Chapters 4 and 5 immediately after Chapter 1, but I present the homeworks in sequential chapter order here.
Feel free to use any these ideas in your classrooms, but please don't electronically post the answer sheets where they may become publically available to any student, anywhere.
Julie A. Nelson
Department of Economics
University of Massachusetts, Boston
Econ 101Prof. Nelson
Chapter 1
1. Web
Answer sheets to homeworks and exams, as well as important class announcements, will be posted on the course website (at As part of this Problem Set, familiarize yourself with the website by going to the “Got a Question” section and following the (simple) instructions in the “Read Me” message.
Answer the following questions based on Chapter 1 of the textbook, in the order given, on a new sheet of paper. Remember to use blue or black ink, or pencil!
2. Short Answer
Answer the following questions in short paragraphs. (You do not need to copy out everything the book says on a topic, but you do need to say enough to make it clear that you have correctly understood the terms used.)
a. Briefly describe the four essential economic activities.
b. [For this problem, ignore the statement on p. 4 of the text about "the final goal of getting a good job." Jobs are generally valued as intermediategoals, that move you towards final goals such as those mentioned in the table on the top of p. 9.] What would you say are some of the "final goals" you have for your own life? How is your attendance at an introductory economics class related to your own "final" and "intermediate" goals?
c. "Economics is all about businesses and profit." Is this statement true or false? Explain, including in your explanation a correct definition of economics, and an identification of the three spheres of economic activity.
d. A radio station broadcasts a program giving people information about how to make their homes more energy-efficient. Is this program a "public good"? Why or why not?
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3. Problem
The figure below shows a society's Production Possibilities Frontier for production of corn and wheat. Answer the questions below, referring to this figure.
a. What is the maximum quantity of corn that can be produced, if the society produces no wheat?
b. If the society produces 15 units of wheat, what is the maximum quantity of corn it can produce?
c. Does point A represent an efficient use of resources? Explain.
d. Which point on the graph represents a combination of outputs that is unattainable? Explain, referring to specific quantities of corn and wheat in your explanation.
e. Find a point on the graph that illustrates an inefficient use of resources. Explain why there is inefficiency, referring to specific quantities of corn and wheat in your explanation.
f. Suppose the society moves from (efficiently) producing only wheat to producing both wheat and 40 units of corn. What is the opportunity cost of producing these first 40 units of corn?
g. Suppose the society moves from (efficiently) producing 40 units of corn to producing 80 units of corn. What is the opportunity cost of producing these last 40 units of corn?
h. Comparing your answer to part (g) to your answer in part (f), what point about the use of resources for different kinds of production is illustrated? That is, why does the opportunity cost change?
i. Would producing at point D be the best choice for this society? Explain your answer.
Econ 101Prof. Nelson
Chapter 1 ANSWER NOTES
1. Web(3 circles)
2. Short Answer(8 circles total)
a. 'Briefly describe the four essential economic activities." (2 circles)
The four essential economic activities are:
1. resource maintenance, which is the management of natural, manufactured, human, and social resources
2. production, which is the conversion of resources into goods and services
3. distribution, which shares products and resources among people,
and
4. consumption, which is the final use of a good or service.
b. "What would you say are some of the "final goals" you have for your own life? How is your attendance at an introductory economics class related to your own "final" and "intermediate" goals?" (2 circles--for an answer that correctly distinguishes final from intermediate goals, whatever the examples given!)
Final goals: probably include goals such as survival, happiness, having a sense of meaning to one's life, "being all you can be," or spiritual goals (see suggestions in the table on the top of p. 9).
Attendance in this class could relate directly to your final goals if it makes you happy or develops your potential. If you hope it will increase your earning power, then it is directed towards the intermediate goal of gaining wealth (which you hope will satisfy needs and make you happy).
c. "'Economics is all about businesses and profit.' Is this statement true or false? Explain, including in your explanation a correct definition of economics, and an identification of the three spheres of economic activity." (2 circles)
False. Economics is much broader--it is about the way that people organize themselves to sustain life and enhance its quality. In addition to the business sphere, the core sphere (of families and communities) and the public purpose sphere (of governments and non-profits) are also important locations of economic activity.
d. A radio station broadcasts a program giving people information about how to make their homes more energy-efficient. Is this program a "public good"? Why or why not? (2 circles)
Yes--it fits the definition of a public good on p. 22. One person listening to a radio program doesn't make it any harder for another person to listen, too ("nondiminishable"), and anyone with a radio can listen in ("nonexcludable").
3. Problem(9 circles total)
a. 80 units of corn(1 circle)
b. 60 units of corn (1 circle)
c. Yes, point A is efficient. All points that lie on the PPF represent efficient production.(1 circle)
d. Point B is unattainable. Point B represents production of 15 units of wheat and 80 units of corn. But if the society produces 15 units of wheat they only actually have enough resources left to produce, at the most, 60 units of corn. (Alternatively, if it produces 80 units of corn, it can produce zero units of wheat.) (1 circle)
e. Point E illustrates inefficiency. At point E only 15 units of wheat and 10 units of corn are produced, when more of each output—for example, 20 units of wheat and 40 units of corn at point D—are possible.(1 circle)
f. The opportunity cost of the first 40 units of corn is only five units of wheat. (Point F to point D)(1 circle)
g. The opportunity cost of the last 40 units of corn is 20 units of wheat. (Point D to Point A)(1 circle)
h. The first units of corn use the resources best suited for corn production, and least suited for wheat, and so are relatively "cheap." As more corn is produced, it competes more for resources that could also be used for producing wheat, so the opportunity cost rises.(1 circle)
i. Not necessarily. We cannot know which point is best for the society unless we know its needs and preferences for corn versus wheat. (1 circle)
TOTAL POSSIBLE: 17 circles for questions 2 and 3; I will add the 3 circles for #1 when I check the website. 20 CIRCLES TOTAL.
Econ 101Prof. Nelson
Chapter 2 and Chapter 3
1. Matching
Match each concept in Column A with a definition or example in Column B.
Column A / Column Ba.low time discount rate / 1.the market for used furniture on Craig's list
b.market value / 2.the price determined by a (perhaps hypothetical) interaction of many buyers and sellerson an auction-type market
c.perfect rationality / 3. the price tag on a shirt says "$14.99"
d.posted prices / 4. the type of market that connects food producers with supermarkets
e.wholesale market / 5.roads and communications equipment
f. consent / 6. when one person or agency is given decision-making authority
g. institution / 7. buying fuel oil now, that will be delivered two months from now
h. futures market / 8. when people discuss and negotiate to come to an agreement
i. resale market / 9. selecting from among alternatives
j. administration
k. physical infrastructure
l. choice behavior / 10. a way of structuring social interactions
11. putting a lot of importance on the future
12. thoughtfully coming to the optimal decision
2. Mini-Research and Analysis
Locate a article from a mainstream newspaper (for example, the Boston Globe or New York Times, either on-line or in print) concerning the current economic crisis and its causes or possible solutions. It should be from sometime in the last three months. Some good keywords to search on to find such an article, this week, include:
financial (or banking) crisisfinancial regulation
financial deregulation / mortgage crisis
recession nationalization / Citigroup
government bailout
Glass-Steagall Act
Print and attach this article to the homework you hand in. Also write a short paragraph (5-10 sentences):
1. Describing how this article relates to debates about whether the United States should have a "laissez-faire" economy.
2. Describing questions you have in your mind after reading the article. (These could be, for example, about unfamiliar terms, about whether certain facts are correct, or about the quality of arguments made.)
Econ 101Prof. Nelson
Chapter 2 and Chapter 3 ANSWER NOTES
Matching:
a-11
b-2
c-12
d-3
e-4
f-8
g-10
h-7
i-1
j-6
k-5
l-9
(12 circles)
2. Mini-Research and Analysis
Graded by the instructor (15 circles)
Econ 101Prof. Nelson
Chapter 4
1. Short Answer
Answer the following questions in short paragraphs. Pay special attention to the words and phrases underlined!
a. Name the five "nonprice determinants" of supply.
b. Name the five "nonprice determinants" of demand.
c.. State whether the following statements are true or false, in the model of supply and demand, and explain why (using words and/or graphs). Pay special attention to the words and phrases that are underlined!
i. "In the market for gasoline, if the price of gasoline goes up, the supply of gasoline will increase."
ii. "In the market for shoes, if the price of shoes goes down, the quantity demanded of shoes will rise."
iii. "Complementary goods are goods that make the person buying them look good."
iv. "A rise in demand for IPods will drive up their price, which will increase the supply of IPods."
v. "A price ceiling in the market for haircuts will create asurplus of haircuts."
2. Problem: The Market for Tea
Suppose the following schedules describe supply and demand for tea, where prices are per pound and quantities are in tons.
Price / $ 1.00 / $1.50 / $2.00 / $2.50 / $3.00Quantity of Tea Supplied / 15 / 20 / 25 / 30 / 35
Quantity of Tea Demanded / 25 / 20 / 15 / 10 / 5
a. Using graph paper and a ruler, or a computer spreadsheet or presentation program, carefully graph and label the supply and demand curves for tea.
b. At a price of $2.50 per pound, is there a surplus, shortage, or equilibrium? Illustrate in the graph.
c. At a price of $1.50 per pound, is there a surplus, shortage, or equilibrium?Illustrate in the graph.
d. Now suppose that a drought hits tea-growing areas. At each price, the quantity suppliers are willing to provide to the market is reduced by 10 tons. (For example, at a price of $1.00, only 5 tons are now supplied, and at a price of $1.50, only 10 tons.) Demand is unchanged. On a new supply and demand graph, show both the original and the new (drought) situation.
e. Has the drought caused a change in the supply of tea?
f. Has the drought resulted in a change in the quantity of tea demanded? Why or why not?
3. Problem: The consequences of Shifts in Supply, Demand, or Both
Answer the questions below by drawing a graph. Also state which "nonprice determinant" is being effected, on which side of the market, and what happens to equilibrium price and equilibrium quantity. Think about only the strongest and most direct effect(s) and remember the ceteris paribus assumption.
Example: Market for gasoline: A hurricane hits the Gulf of Mexico, destroying refineries that produce gasoline from crude oil.
/ Supply Side: "the number of producers"P (or "equilibrium price increases")
Q (or "equilibrium quantity falls")
a. Market for solar water heaters: There is a large increase in the number of firms making solar water heaters.
b. Market for solar water heaters: The price of gas and electricity, which are used to power (non-solar) hot water heaters in many homes, rises.
c. Market for solar water heaters: Due to the invention of a new technology, the price of solar cells used to make solar water heaters falls.
d. Market for solar water heaters: Due to a recession, the incomes of homeowners fall.
e. Market for oranges: A movie star appears in television advertisements, promoting the health and beauty benefits that come from eating oranges.
f. Market for oranges: An insect infestation reduces the size of the orange crop.
g. Market for oranges: The prices of grapes, apples, and tangerines all fall.
h. Market for oranges: Consumers hear a rumor that an insect infestation is going to raise the price of oranges.
i. Market for oranges: An insect infestation reduces the size of the orange crop and a movie star appears in television advertisements promoting the benefits of eating oranges.
Econ 101Prof. Nelson
Chapter 4 ANSWER NOTES
1. Short Answer(9 circles total)
a. Name the five "nonprice determinants" of supply. (2 circles)
1. The available technology of production
2. Resource prices
3. The number of producers
4. Producer expectations about future prices and technology
5. The prices of related goods and services
b. Name the five "nonprice determinants" of demand. (2 circles)
1. Tastes and preferences
2. Incomes and/or available assets
3. Availability and prices of related goods and services
4. Consumer expectations about future prices and incomes
5. The number of consumers
c. State whether the following statements are true or false, in the model of supply and demand, and explain why (using words and/or graphs).
i. "In the market for gasoline, if the price of gasoline goes up, the supply of gasoline will increase."
False. This should read, "the quantity supplied of gasoline will go up," since it refers to a movement along a supply curve. (1 circle)
ii. "In the market for shoes, if the price of shoes goes down, the quantity demanded of shoes will rise."
True. When a good's own price changes, the "quantity demanded" changes. This is a movement along a curve.(1 circle)
iii. "'Complementary' goods are goods that make the person buying them look good."
False. complementary goods are goods that are used together (such as pens and paper.(1 circle)
iv. "A rise in demand for IPods will drive up their price, which will increase the supply of IPods."
False. The increase in price (that results from the rise in demand) will cause a movement along the supply curve for IPods, as illustrated below. The supply curve doesn't shift. (1 circle)
v. "A price ceiling in the market for haircuts will create asurplus of haircuts."
False. If it is below the equilibrium price, the ceiling will create a shortage of haircuts, as shown in the graph below (where QD > QS).(1 circle)
2. (8 circles total)
a. Using graph paper and a ruler, or a computer spreadsheet or presentation program, carefully graph and label the supply and demand curves for tea.(3 circles)
b. At a price of $2.50 per pound, is there a surplus, shortage, or equilibrium? Illustrate in the graph.
Surplus (as shown by the dashed line in the graph).(1 circle)
c. At a price of $1.50 per pound, is there a surplus, shortage, or equilibrium? Illustrate in the graph.
Equilibrium (see point E).(1 circle)
d. On a new supply and demand graph, show both the original and the new (drought) situation. (1 circle)