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Tutorial 1 (Intro)

This document contains an economics tutorial homework with questions about key economic concepts. It asks the student to: 1) Define the four factors of production and their relationship to income. 2) Calculate opportunity costs in scenarios about consumption choices and production possibilities. 3) Sketch production possibility frontiers and identify points of efficient and inefficient production. 4) Explain why one PPF is a straight line while another is curved, relating the shape to assumptions about resource allocation. The homework evaluates the student's understanding of fundamental economic topics like scarcity, choice, costs, and efficiency through written answers and graphical analysis.

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Shivarni Kumar
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19 views4 pages

Tutorial 1 (Intro)

This document contains an economics tutorial homework with questions about key economic concepts. It asks the student to: 1) Define the four factors of production and their relationship to income. 2) Calculate opportunity costs in scenarios about consumption choices and production possibilities. 3) Sketch production possibility frontiers and identify points of efficient and inefficient production. 4) Explain why one PPF is a straight line while another is curved, relating the shape to assumptions about resource allocation. The homework evaluates the student's understanding of fundamental economic topics like scarcity, choice, costs, and efficiency through written answers and graphical analysis.

Uploaded by

Shivarni Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Economics (MCR001)
Tutorial Homework Exercise for Week 1 (Introduction)

1.The most fundamental economic problem is _____________.

Ans:

2. Resources
What are the “factors of production” and how are they related to the income for the owners of these
resources? (fill in the blanks)

Ans: The four factors of production are _______, _________, _________ and __________.

Factors of Production Owner of resources Income

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3. An opportunity cost is the total cost of all other alternatives foregone whenever a choice is made.
(True or false).

Ans: True or False,


Explanation: / definition of Opportunity Cost:

4. From 9A.M to 11 A.M., Candy can sleep in, go to her economics lecture, or go out with her
boyfriend. Suppose that Candy decides to go to the lecture but thinks that, if she hadn’t, she would
otherwise have slept in. What is the opportunity cost for Candy when she decided to go to the
economic lecture? (Ans: sleep in or go out with her boyfriend?)

Ans: The opportunity cost of going to the lecture ______________________________ .

5. Marginal benefits (MB) and Marginal costs (MC) of beer

No. Marginal Marginal MR - MC


of Benefit cost (MC) Sketch the marginal cost curve (MC) and the marginal
beer (MB, MR) of beer benefit (MB) curve. Indicate the quantity of beer that
of beer achieve the highest satisfaction for consumption or (uses
1 6 1.5 resources efficiently for production).
2 5 2
3 4 2.5
4 3 3 Ans:
5 2 3.5
6 1 4

Ans: when the consumption of beer is _________ units, because _____________________________

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6. Production Possibility Frontier (PPF)


butter

A B C D
Cheese 0 35 55 60
Butter 50 40 20 0

Cheese

a. State the production levels for this economy at Point B and Point C.

Ans: Point B: ______ Cheese, ______ butter

Point C: ______ Cheese, ______ butter

***
b. If the economy is operating at point C, the opportunity cost of producing an additional 20 units of butter is:
(**Hints: Opportunity cost equals the quantity of goods you must give up divided by the quantity of
goods you will gain).

Ans:
Butter gained from ________ to ________ = +
Cheese forgone from ________ to ________ = -

Therefore, the Opportunity Cost = no. of cheese foregone ÷ no. of butter gained = ______ ÷ ______ =
That means, ______ unit of butter for ______ unit of Cheese

c. Point F represents inefficient / most efficient / unattainable.


Ans: ________________ (because it’s _____________ the PPF).

d. As we move from point A to point D, the opportunity costs of cheese in terms of butter fall / remain
unchanged / rise.
Ans: The opportunity cost _________________ as we increase production of one goods.
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7. Below is a production possibilities table for coffee and coins:


coin

A B C D E F
Coffee 0 1 2 3 4 5
mango 10 8 6 4 2 0

coffee
a. State the production levels for this economy at Point B and Point C.
Ans: Point B: ______ coffee, ______ mangos

Point C: ______ coffee, ______ mangos

b. Sketch the PPF with coffee on the x axis and mango on the y axis.

c. In the above PPF for Coffee and mangos, the opportunity cost of coffee when moving from A to B is:

(**Hints: Opportunity cost equals the quantity of goods you must give up divided by the quantity of
goods you will gain).

Ans: Quantity of mangos given up = __________ =


Increase in the Quanity of coffee = __________ =

Therefore, the opportunity cost = ______ ÷ ______ =


ie ______ coffee = ______ mangos
You give up ____________ mangos tor 1 cup of coffee.

d. In the above PPF for Coffee and Mango, the opportunity cost of coffee when moving from E to C is:

Ans: Quantity of coffee given up = (______ – ______) = ______


Increase in the Quanity of mango = (______ – ______) = ______

Therfore the opportunity cost = ______ ÷ ______ = ______


ie ______ mango = ______ coffee

8. Why is this PPF (coffee & mango) a straight line compared to the previous PPF (butter and cheese)? What
does the shape of the PPF tell us?

Ans: If the PPF is a straight line, it means “____________ __________ __________”.

If the PPF is concave to the origin, it means “____________ __________ __________”.


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