1.Imagine a firm that manufactures textiles (pants and shirts). List the four categories of resources, and for each category, give an example of a specific resource that the firm might use to manufacture textiles.

2.Describe some of the opportunity costs of the following choices.

3.Use the concept of opportunity cost to explain the following situations.

4.A representative of the U.S. clothing industry recently made this statement: “Workers in Asia often work in sweatshop conditions earning only pennies an hour. American workers are more productive and, as a result, earn higher wages. In order to preserve the dignity of the American workplace, the government should enact legislation banning imports of low-wage Asian clothing.”

5.Are the following statements true or false? Explain your answers.

6.Evaluate this statement: “It is easier to build an economic model that accurately reflects events that have already occurred than to build an economic model to forecast future events.” Do you think that this is true or not? Why? What does this imply about the difficulties of building good economic models?

7.An economist might say that colleges and universities “produce” education, using faculty members and students as inputs. According to this line of reasoning, education is then “consumed” by households.

8.Suppose Atlantis is a small, isolated island in the South Atlantic. The inhabitants grow potatoes and catch fish. The accompanying table shows the maximum annual output combinations of potatoes and fish that can be produced. Obviously, given their limited resources and available technology, as they use more of their resources for potato production, there are fewer resources available for catching fish.

9.Two important industries on the island of Bermuda are fishing and tourism. According to data from the World Resources Institute and the Bermuda Department of Statistics, in the year 2009 the 306 registered fishermen in Bermuda caught 387 metric tons of marine fish. And the 2,719 people employed by hotels produced 554,400 hotel stays (measured by the number of visitor arrivals). Suppose that this production point is efficient in production. Assume also that the opportunity cost of one additional metric ton of fish is 2,000 hotel stays and that this opportunity cost is constant (the opportunity cost does not change).

10.In the ancient country of Roma, only two goods, spaghetti and meatballs, are produced. There are two tribes in Roma, the Tivoli and the Frivoli. By themselves, the Tivoli each month can produce either 30 pounds of spaghetti and no meatballs, or 50 pounds of meatballs and no spaghetti, or any combination in between. The Frivoli, by themselves, each month can produce 40 pounds of spaghetti and no meatballs, or 30 pounds of meatballs and no spaghetti, or any combination in between.

In a.d. 100, the Frivoli discovered a new technique for making meatballs that doubled the quantity of meatballs they could produce each month.

11.In recent years, the United States used 124 million acres of land for wheat or corn farming. Of those 124 million acres, farmers used 50 million acres to grow 2.158 billion bushels of wheat, and 74 million acres of land to grow 11.807 billion bushels of corn. Suppose that U.S. wheat and corn farming is efficient in production. At that production point, the opportunity cost of producing one additional bushel of wheat is 1.7 fewer bushels of corn. However, farmers have increasing opportunity costs, so additional bushels of wheat have an opportunity cost greater than 1.7 bushels of corn. For each of the production points described below, decide whether that production point is (i) feasible and efficient in production, (ii) feasible but not efficient in production, (iii) not feasible, or (iv) uncertain as to whether or not it is feasible.

12.The Hatfield family lives on the east side of the Hatatoochie River, and the McCoy family lives on the west side. Each family’s diet consists of fried chicken and corn-on-the-cob, and each is self-sufficient, raising their own chickens and growing their own corn. Explain the conditions under which each of the following statements would be true.

13.According to the U.S. Census Bureau, back in July 2006 the United States exported aircraft worth $1 billion to China and imported aircraft worth only $19,000 from China. During the same month, however, the United States imported $83 million worth of men’s trousers, slacks, and jeans from China but exported only $8,000 worth of trousers, slacks, and jeans to China. Using what you have learned about how trade is determined by comparative advantage, answer the following questions.

14.Peter Pundit, an economics reporter, states that the European Union (EU) is increasing its productivity very rapidly in all industries. He claims that this productivity advance is so rapid that output from the EU in these industries will soon exceed that of the United States and, as a result, the United States will no longer benefit from trade with the EU.

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