Question

1. In the circular-flow diagram, which of the following do households NOT do?

a. Produce goods and services

b. Buy goods and services that firms produce

c. Own the factors of production

2. John works part-time for a moving company and earns a total of $232 each weekend. Next weekend a friend invites him on a rafting trip that will cost him a total of $269. If he goes on the trip he will not be able to work. What is John’s explicit cost of going on the rafting trip? Enter a whole number with no dollar sign. ___________.

3. Sometimes economists disagree because their values differ. Which of the following instances best reflects this source of disagreement?

a.       One economist believes that the labor market is strengthening because the unemployment rate is declining; another argues that the unemployment rate is not a good measure of the labor market's health.

b.      One economist advises against a consumption tax because she thinks it's unfair for low-income people; another economist argues that what's fair isn't relevant.

c.       One economist believes that American jobs are being lost to over-seas manufacturers; another economist disputes this claim.

Answer 1

1) Solution: Produce goods and services

Explanation: The households buy all the goods and services that firms produce

2) Solution: $269

Explanation: An explicit cost refers to direct payment made to others

3) Solution: One economist advises against a consumption tax because she thinks it's unfair for low-income people; another economist argues that what's fair isn't relevant.

Explanation: One economist advises against increases in consumption tax because thinks such increases are unfair to low-income people; another economist disputes the idea that increases in consumption taxes are unfair to low-income people