201 Chapter 2 Assignment

1. Here is a production possibilities table for war goods (rockets) and civilian goods (automobiles):

Production Possibilities:

Type of ProductionABCDE

Automobiles02468

Rockets302721120

Questions:

a.What does possibility "E" in the above table mean?

-if the company makes 8 automobiles they won't be able to make and rockets. 8:0

b. Draw the production possibilities frontier (PPF).Use thevertical axisforrockets, and thehorizontal axisforautomobiles.

c. If the economy is at point C, what is the opportunity cost of one more automobile?

d. If the economy is at point C, what is the opportunity cost of one more rocket?

e. Does the PPF reflect a constant opportunity cost or increasing opportunity cost? Explain your answer.

2. Explain the effect of COVID-19 on the U. S. economy and draw a PPF to show the effect?

3. Classify each of the following statements as positive or normative. Explain your answer.

a. Lower tax rates encourage more work and more saving.

b. The Federal Reserve System should reduce the growth rate of the money supply.

c. Society faces a short-run trade-off between efficiency and equity.