Question: 1) What is economics?

2) Using an example from your own life, define opportunity cost.

3) Using the PPF above,

a. What is the opportunity cost of producing Noodles? Show your work.

b. What is the opportunity cost of producing Pizza?

c. Show a production point on the chart that is alllocatively efficient

4) Using the PPFs above:

a. Determine which country has the comparative advantage in producing Noodles. Show your work.

b. Determine which country has the comparative advantage in producing Pizza. Show your work.

c. Which country has the absolute advantage in producing Pizza? Explain.

5) Using the diagram above:

a. Label the equilibrium quantity and price P* and Q*.

b. Suppose the market in question represents a normal good. Show on the graph the effect of consumer's income decreasing. Note the new market price and quantity and how they are different from the previous equilibrium. Show the shift.

c. Why is the demand curve downward sloping?

6) In the market for Broccoli you observe that input prices are increasing. Simultaneously, you observe that Broccoli is becoming more favorable among consumers. Explain, using two graphs, what you think will happen to equilibrium price and quantity in the Broccoli market after both of these events have been experienced. (15 points).

7) Define consumer surplus in your own words..

8) On the diagram above

a. Calculate consumer and producer surplus in the free market. Show your work.

b. Impose a price floor at $75. Show the price floor, label QD and QS at the price floor.

c. Does the price floor cause a shortage or surplus?

d. Show deadweight loss from the price floor. Calculate it. Show your work.