Macro Assignment 1
ECON 1020
Principles of Macroeconomics
Assignment 1
Question 1 (10 marks)
(a) The relative scarcity of resources makes the operation of any economy a matter of choosing between alternatives.” Explain.
The world has limited resources and us, as people have unlimited wants. Therefore, we must constantly make decisions to choose what we would rather buy or produce and what we must give up in its consequence. This includes work and time. For example, studying for an exam late at night would give you more time to retain knowledge but would limit your sleep which could lead to a poor exam mark.
(b) The production possibilities table below shows the hypothetical relationship between the production of food and clothing in an economy.
a. What is the marginal opportunity cost of producing the second unit of clothing?
18-13= 5
The marginal opportunity cost of producing the second unit of clothing is 5 units of food.
b. What is the total opportunity cost of producing two units of clothing?
22-13= 9
The total opportunity cost of producing two units of clothing is 9 units of food.
c. What is the marginal opportunity cost of producing the third unit of clothing?
13-7= 6
The marginal opportunity cost of producing the third unit of clothing is 6 units of food.
d. What is the total opportunity cost of producing three units of clothing?
22-7= 15
The total opportunity cost of producing three units of clothing is 15 units of food.
Combination Food Clothing
A 0 4
B 7 3
C 13 2
D 18 1
E 22 0
(c) Describe the adjustments in the production possibilities curves in each of the following situations for the Canadian economy.
a. the economy moves from full employment into a deep recession
The production possibilities curve moves to the left. This demonstrates lower production possibilities.
b. the economy makes great strides in eliminating discrimination
The production possibilities curve moves to the right. By increasing the amount of
Principles of Macroeconomics
Assignment 1
Question 1 (10 marks)
(a) The relative scarcity of resources makes the operation of any economy a matter of choosing between alternatives.” Explain.
The world has limited resources and us, as people have unlimited wants. Therefore, we must constantly make decisions to choose what we would rather buy or produce and what we must give up in its consequence. This includes work and time. For example, studying for an exam late at night would give you more time to retain knowledge but would limit your sleep which could lead to a poor exam mark.
(b) The production possibilities table below shows the hypothetical relationship between the production of food and clothing in an economy.
a. What is the marginal opportunity cost of producing the second unit of clothing?
18-13= 5
The marginal opportunity cost of producing the second unit of clothing is 5 units of food.
b. What is the total opportunity cost of producing two units of clothing?
22-13= 9
The total opportunity cost of producing two units of clothing is 9 units of food.
c. What is the marginal opportunity cost of producing the third unit of clothing?
13-7= 6
The marginal opportunity cost of producing the third unit of clothing is 6 units of food.
d. What is the total opportunity cost of producing three units of clothing?
22-7= 15
The total opportunity cost of producing three units of clothing is 15 units of food.
Combination Food Clothing
A 0 4
B 7 3
C 13 2
D 18 1
E 22 0
(c) Describe the adjustments in the production possibilities curves in each of the following situations for the Canadian economy.
a. the economy moves from full employment into a deep recession
The production possibilities curve moves to the left. This demonstrates lower production possibilities.
b. the economy makes great strides in eliminating discrimination
The production possibilities curve moves to the right. By increasing the amount of