Quiz Answers

Quiz 1 Answers

1. The current opportunity cost of food in terms of textiles is approximately 4/3. Draw a tangent to the PPF at (3000 food, 5000 textiles) and measure the slope. An approximation can be found by picking a point on the PPF near (3000 food, 5000 textiles) and measuring the slope between the two points.

2. If all other countries have an opportunity cost of food of ½ textiles, this country should produce more textiles to trade for food because the international cost of food is less than its own opportunity cost. For example, if it reduced its food production by 1000 to 2000 it could produce about 1300 more textiles. At the international rate of 1 food = ½ textiles, it could trade this for 2600 food: more than it cut production.

3. The new PPF is the gray line above the original PPF. Maximum food production is not affected.

Quiz 2 Answers

The federal government owns and operates public housing projects, providing low-cost housing to low-income families.
What: deciding to produce low-income housing.
How: the government operates it and so decides how much land, labor, and capital is used.
for Whom: the government sets eligibility standards and rents to some of those who apply.

State governments fund universities and colleges and offer reduced tuition prices to their own residents.
What: deciding to produce higher education.
How: the government operates it and so decides how much land, labor, and capital is used.
for Whom: the government is setting admissions standards and decides who may attend.

The federal government provides cash payments to those over 65 under the Social Security program.
What: no production is involved
How: no production is involved
for Whom: those who receive payments are more able to acquire good in the market.

Local governments have zoning laws that specify legally acceptable uses of land in different areas.
What: some involvement in design and location but not whether to build
How: not under these laws
for Whom: no involvement

The federal and state governments have pollution control laws that direct polluters to use certain types of fuels and pollution control equipment.
What: Some control of part of production if production is viewed as a combination of the good (e.g., electricity) and pollution.
How: some control of certain types of capital used.
for Whom: no involvement.

Quiz 3 Answers

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