Homework Assignments For
Microeconomic Principles and Problems A Pluralist Introduction 2e By Geoffrey Schneider
Chapter 1-24
Homework Assignment, Ch01, Answers
1. (20) What are the primary differences between mainstream economics and political economy (Progressive
Political Economists and Radical Political Economists)? Explain briefly in your own words.
Mainstream economics tries to discover the (more or less) constant relationships between economic variables,
trying to be as precise and scientific as possible. Establishing constant relationships allows economists to construct
models, which they use to make forecasts about the future and recommend policies. Establishing relationships in a
changing world requires making a number of restrictive assumptions, which can render economic models
inaccurate at times.
Political economists study how economic institutions (organizations; patterns; culture) affect society as a
whole and how these institutions change over time. They take a broader approach, incorporating a wider variety of
variables, and they are less likely to make restrictive assumptions about human behavior.
2. (50) Consider the description of economic man in the reading, and the description of positive, scientific
economics. Also consider how political economists (Progressive Political Economists and Radical Political
Economists) study human behavior. Then reflect carefully on your own shopping habits. Do you usually make
rational, calculated, fully informed purchases (like “economic man”), or do you tend to buy on impulse for a
variety of reasons, or do you do both? Analyze how much of your purchasing behavior can be captured by
“positive economics,” and when the methods used by political economists would better reflect your behavior.
How much of your shopping behavior could be predicted scientifically? How much of it would be hard to
predict? Your answer should be at least ½ of a page (single spaced) in length.
Mainstream economics assumes that people are self-interested, insatiable, predictable, rational, and calculating,
and that they know all available information about quality and prices. This means we are not influenced by ads or
store displays, we don’t buy on impulse, we don’t buy goods based on image or values, we don’t generally do
things for the benefit of the community, etc.
According to political economists, this does not mesh with many consumers’ behavior nor with history.
Political Economists study how economic institutions affect society as a whole. They see morality, ethics, and
culture all interacting with and affecting the economy. They prefer a more complex study of people featuring
culture, values, information and advertising, instead of assuming (rational economic man) that all people have
insatiable demands, that preferences are determined by non-economic factors, and that people are always
rational and calculating.
Most people find that some of their purchases are rational and calculating and based on a reasonably
good estimate of how good the quality of the product is. But they also acknowledge that many of their purchases
are impulsive and based on very little information. Furthermore, rather than being independent, people’s
purchases are deeply affected by cultural norms and trends.
3. (20) What is austerity? Why do most economists think it is a bad idea to use austerity policies in a
recession?
Austerity is a set of policies that involve reducing government spending or increasing taxes when an economy is
faced with a budget deficit. Most economists, especially Keynesians, believe this policy is inappropriate in a
recession because reductions in spending and increases in taxes take money away from consumers and businesses,
resulting in additional reductions in spending. Thus, austerity policies tend to make recessions worse. Instead,
governments need to spend more and tax less in recessions to stimulate economic growth.
4. (10) Read of the course syllabus carefully. Write a few sentences in which you describe what you will need
to do to succeed in this course. Also write down any questions you have. (Be prepared to ask these
questions in our next class.)
,Answers will vary.
Homework Assignment, Chapter 02, “Scarcity….”
Read: Schneider, Evolution of Economic Ideas and Systems, Chapter 2, “Scarcity, Opportunity Cost and Choice.”
The graph to the right displays a production possibilities Education
curve for the United States, which must choose between
PPC for the U.S.
allocating resources towards Televisions (TVs) or
Education.
50 F
1. (4) What is the opportunity cost of moving from A
point C to point F? 45
E
2. (4) What is the opportunity cost of moving from
D
point D to point E? 30 C
3. Decide whether or not each of the following
statements is true or false, and explain your answer
briefly.
a) (8) Point B will result in the least amount of
economic growth.
Explanation:
B
b) (8) Point C will result in more economic
20 30 40 TVs
0
growth than point E.
Explanation:
c) (8) Point F is inefficient because it uses TV resources to produce Education.
Explanation:
d) (8) Point D cannot be reached due to limited resources and technology.
Explanation:
e) (8) One possible reason for the economy to be at Point A would be if the economy is in a recession.
Explanation:
f) (8) The opportunity cost of 1 unit of Education decreases as the economy moves from Point F to Point
B.
Explanation (show your work):
g) (8) The curved shape of the PPC is a result of the specialization of resources.
Explanation:
4. (6) Suppose that the government slashes spending on education, reducing resources for educational uses.
Carefully explain what will happen to the graph.
5. (30) Mainstream economists focus on the specific choices made by certain actors operating under
conditions of scarcity using the PPC model. Briefly, describe the political economy critique of this
approach, and the additional factors that political economists take into consideration in analyzing the
choices that countries and individuals make.
Study Guide: Your understanding of the production possibilities model will be tested on exam #1. In order to do
well on the PPC questions on the exam, you should be able to solve problems (similar to those in your text and
,those above) without looking at your notes or the book. The best way to learn to use the models is to practice
them. In addition to doing the homework problems, you can study the practice problems available on electronic
reserve and in your book, and you can design your own problems. If you truly understand this material then you
should be able to design your own problem and solve it. This is a good exercise to work on in a group.
Homework Assignment, Chapter 02 Answers
The graph to the right displays a production possibilities
curve for the United States, which must choose Education
between allocating resources towards Televisions (TVs)
PPC for the U.S.
or Education.
1. (4) What is the opportunity cost of moving from
50 F
point C to point F? A
30 units of TVs (what is given up). 45
E
6. (4) What is the opportunity cost of moving from
point D to point E? D
There is no opportunity cost. (The U.S. is using unused
30 C
resources to increase the production of education.)
7. Decide whether or not each of the following
statements is true or false, and explain your answer
briefly.
h) (8) Point B will result in the least amount of
economic growth.
B
TRUE. Explanation: Education is a capital good that
increases productivity and growth in the future. TVs are 20 30 TVs
0 40
a consumer good. Point B has the least amount of the
capital good which corresponds with the least amount of growth.
i) (8) Point C will result in more economic growth than point E.
FALSE. Explanation: Point C involves the production of less education (the capital good) and therefore will be
associated with less growth than point E.
j) (8) Point F is inefficient because it uses TV resources to produce Education.
FALSE. Explanation: All points on the PPC are efficient.
k) (8) Point D cannot be reached due to limited resources and technology.
FALSE. Explanation: Points inside the PPC indicate unused resources. Any point on or within the PPC can be
reached with existing resources.
l) (8) One possible reason for the economy to be at Point A would be if the economy is in a recession.
FALSE. Explanation: There are not enough resources to get to point A, which is beyond the PPC.
m) (8) The opportunity cost of 1 unit of Education decreases as the economy moves from Point F to Point B.
TRUE. Explanation: From F to E, 5E=20T, so 1E-4T. From E to C, 15E=10T, so . From C to B, 30E=10T, so
. Education has the highest opportunity cost per unit at point F. the opportunity cost of 1E decreases as
we move to point B.
n) (8) The curved shape of the PPC is a result of the specialization of resources.
TRUE. Explanation: The curved PPC indicates that some resources are better suited to the production of one good
than another. If resources are not specialized then the PPC is a straight line.
8. (6) Suppose that the government slashes spending on education, reducing resources for educational uses.
Carefully explain what will happen to the graph.
The PPC curve shifts in on the Education axis (see the graph). The maximum amount of education that can now be
produced is less than before. The PPC does not change on the TVs axis. So the new PPC would go from point B to a
point below point F on the Education axis.
9. (30) Mainstream economists focus on the specific choices made by certain actors operating under
conditions of scarcity using the PPC model. Briefly, describe the political economy critique of this approach,
and the additional factors that political economists take into consideration in analyzing the choices that
, countries and individuals make.
Political economists prefer a much broader approach, which analyzes the institutions behind the decisions that are
being made. Specifically, political economists consider the ethics of decisions, how culture and conspicuous
consumption shape decision-making in favor of seemingly excessive consumer goods, the chronic
underemployment of resources that exists in most economies (especially surplus labor), inequality, gender
empowerment in decision-making, and power dynamics (who is making the decisions, and what their interests
are).
Homework Assignment, Chapter 03, Pre-Capitalist Systems
Read: Schneider, Chapter 3, “The Evolution of Pre-Capitalist Economic Systems.” Then answer
the following questions. Your answers should be a paragraph in length.
1. (20) Describe the role played by markets in traditional, slave, feudal, and mercantilist
economic systems.
2. (20) How did the role and status of women change as economic systems evolved from
traditional economies to Mercantilism?
3. (20) How is the generation and utilization of the surplus product important to
understanding economic development?
4. (20) Construct an argument for which 2 factors were most important in eroding Feudalism
and paving the way for Mercantilism. Use specific examples to support your argument.
5. (20) How did attitudes towards greed (self-interest) change as economic systems evolved?
Does evidence from economic history indicate that humans are primarily group oriented,
self-interested, or a mix of the two?
Study Guide: The readings on economic history will be extremely useful as background for the
essay question on the first exam. In particular, keep in mind how our economic system has
evolved over time, and study the debates over which groups benefit most from the operation
of a capitalist economic system. Also make sure you understand the major economic subjects
taken up in this material, including tradition, authority, markets, classes, surplus product, and
the division of labor. The end of chapter questions are good examples of what exam questions
on this material might look like.
Microeconomic Principles and Problems A Pluralist Introduction 2e By Geoffrey Schneider
Chapter 1-24
Homework Assignment, Ch01, Answers
1. (20) What are the primary differences between mainstream economics and political economy (Progressive
Political Economists and Radical Political Economists)? Explain briefly in your own words.
Mainstream economics tries to discover the (more or less) constant relationships between economic variables,
trying to be as precise and scientific as possible. Establishing constant relationships allows economists to construct
models, which they use to make forecasts about the future and recommend policies. Establishing relationships in a
changing world requires making a number of restrictive assumptions, which can render economic models
inaccurate at times.
Political economists study how economic institutions (organizations; patterns; culture) affect society as a
whole and how these institutions change over time. They take a broader approach, incorporating a wider variety of
variables, and they are less likely to make restrictive assumptions about human behavior.
2. (50) Consider the description of economic man in the reading, and the description of positive, scientific
economics. Also consider how political economists (Progressive Political Economists and Radical Political
Economists) study human behavior. Then reflect carefully on your own shopping habits. Do you usually make
rational, calculated, fully informed purchases (like “economic man”), or do you tend to buy on impulse for a
variety of reasons, or do you do both? Analyze how much of your purchasing behavior can be captured by
“positive economics,” and when the methods used by political economists would better reflect your behavior.
How much of your shopping behavior could be predicted scientifically? How much of it would be hard to
predict? Your answer should be at least ½ of a page (single spaced) in length.
Mainstream economics assumes that people are self-interested, insatiable, predictable, rational, and calculating,
and that they know all available information about quality and prices. This means we are not influenced by ads or
store displays, we don’t buy on impulse, we don’t buy goods based on image or values, we don’t generally do
things for the benefit of the community, etc.
According to political economists, this does not mesh with many consumers’ behavior nor with history.
Political Economists study how economic institutions affect society as a whole. They see morality, ethics, and
culture all interacting with and affecting the economy. They prefer a more complex study of people featuring
culture, values, information and advertising, instead of assuming (rational economic man) that all people have
insatiable demands, that preferences are determined by non-economic factors, and that people are always
rational and calculating.
Most people find that some of their purchases are rational and calculating and based on a reasonably
good estimate of how good the quality of the product is. But they also acknowledge that many of their purchases
are impulsive and based on very little information. Furthermore, rather than being independent, people’s
purchases are deeply affected by cultural norms and trends.
3. (20) What is austerity? Why do most economists think it is a bad idea to use austerity policies in a
recession?
Austerity is a set of policies that involve reducing government spending or increasing taxes when an economy is
faced with a budget deficit. Most economists, especially Keynesians, believe this policy is inappropriate in a
recession because reductions in spending and increases in taxes take money away from consumers and businesses,
resulting in additional reductions in spending. Thus, austerity policies tend to make recessions worse. Instead,
governments need to spend more and tax less in recessions to stimulate economic growth.
4. (10) Read of the course syllabus carefully. Write a few sentences in which you describe what you will need
to do to succeed in this course. Also write down any questions you have. (Be prepared to ask these
questions in our next class.)
,Answers will vary.
Homework Assignment, Chapter 02, “Scarcity….”
Read: Schneider, Evolution of Economic Ideas and Systems, Chapter 2, “Scarcity, Opportunity Cost and Choice.”
The graph to the right displays a production possibilities Education
curve for the United States, which must choose between
PPC for the U.S.
allocating resources towards Televisions (TVs) or
Education.
50 F
1. (4) What is the opportunity cost of moving from A
point C to point F? 45
E
2. (4) What is the opportunity cost of moving from
D
point D to point E? 30 C
3. Decide whether or not each of the following
statements is true or false, and explain your answer
briefly.
a) (8) Point B will result in the least amount of
economic growth.
Explanation:
B
b) (8) Point C will result in more economic
20 30 40 TVs
0
growth than point E.
Explanation:
c) (8) Point F is inefficient because it uses TV resources to produce Education.
Explanation:
d) (8) Point D cannot be reached due to limited resources and technology.
Explanation:
e) (8) One possible reason for the economy to be at Point A would be if the economy is in a recession.
Explanation:
f) (8) The opportunity cost of 1 unit of Education decreases as the economy moves from Point F to Point
B.
Explanation (show your work):
g) (8) The curved shape of the PPC is a result of the specialization of resources.
Explanation:
4. (6) Suppose that the government slashes spending on education, reducing resources for educational uses.
Carefully explain what will happen to the graph.
5. (30) Mainstream economists focus on the specific choices made by certain actors operating under
conditions of scarcity using the PPC model. Briefly, describe the political economy critique of this
approach, and the additional factors that political economists take into consideration in analyzing the
choices that countries and individuals make.
Study Guide: Your understanding of the production possibilities model will be tested on exam #1. In order to do
well on the PPC questions on the exam, you should be able to solve problems (similar to those in your text and
,those above) without looking at your notes or the book. The best way to learn to use the models is to practice
them. In addition to doing the homework problems, you can study the practice problems available on electronic
reserve and in your book, and you can design your own problems. If you truly understand this material then you
should be able to design your own problem and solve it. This is a good exercise to work on in a group.
Homework Assignment, Chapter 02 Answers
The graph to the right displays a production possibilities
curve for the United States, which must choose Education
between allocating resources towards Televisions (TVs)
PPC for the U.S.
or Education.
1. (4) What is the opportunity cost of moving from
50 F
point C to point F? A
30 units of TVs (what is given up). 45
E
6. (4) What is the opportunity cost of moving from
point D to point E? D
There is no opportunity cost. (The U.S. is using unused
30 C
resources to increase the production of education.)
7. Decide whether or not each of the following
statements is true or false, and explain your answer
briefly.
h) (8) Point B will result in the least amount of
economic growth.
B
TRUE. Explanation: Education is a capital good that
increases productivity and growth in the future. TVs are 20 30 TVs
0 40
a consumer good. Point B has the least amount of the
capital good which corresponds with the least amount of growth.
i) (8) Point C will result in more economic growth than point E.
FALSE. Explanation: Point C involves the production of less education (the capital good) and therefore will be
associated with less growth than point E.
j) (8) Point F is inefficient because it uses TV resources to produce Education.
FALSE. Explanation: All points on the PPC are efficient.
k) (8) Point D cannot be reached due to limited resources and technology.
FALSE. Explanation: Points inside the PPC indicate unused resources. Any point on or within the PPC can be
reached with existing resources.
l) (8) One possible reason for the economy to be at Point A would be if the economy is in a recession.
FALSE. Explanation: There are not enough resources to get to point A, which is beyond the PPC.
m) (8) The opportunity cost of 1 unit of Education decreases as the economy moves from Point F to Point B.
TRUE. Explanation: From F to E, 5E=20T, so 1E-4T. From E to C, 15E=10T, so . From C to B, 30E=10T, so
. Education has the highest opportunity cost per unit at point F. the opportunity cost of 1E decreases as
we move to point B.
n) (8) The curved shape of the PPC is a result of the specialization of resources.
TRUE. Explanation: The curved PPC indicates that some resources are better suited to the production of one good
than another. If resources are not specialized then the PPC is a straight line.
8. (6) Suppose that the government slashes spending on education, reducing resources for educational uses.
Carefully explain what will happen to the graph.
The PPC curve shifts in on the Education axis (see the graph). The maximum amount of education that can now be
produced is less than before. The PPC does not change on the TVs axis. So the new PPC would go from point B to a
point below point F on the Education axis.
9. (30) Mainstream economists focus on the specific choices made by certain actors operating under
conditions of scarcity using the PPC model. Briefly, describe the political economy critique of this approach,
and the additional factors that political economists take into consideration in analyzing the choices that
, countries and individuals make.
Political economists prefer a much broader approach, which analyzes the institutions behind the decisions that are
being made. Specifically, political economists consider the ethics of decisions, how culture and conspicuous
consumption shape decision-making in favor of seemingly excessive consumer goods, the chronic
underemployment of resources that exists in most economies (especially surplus labor), inequality, gender
empowerment in decision-making, and power dynamics (who is making the decisions, and what their interests
are).
Homework Assignment, Chapter 03, Pre-Capitalist Systems
Read: Schneider, Chapter 3, “The Evolution of Pre-Capitalist Economic Systems.” Then answer
the following questions. Your answers should be a paragraph in length.
1. (20) Describe the role played by markets in traditional, slave, feudal, and mercantilist
economic systems.
2. (20) How did the role and status of women change as economic systems evolved from
traditional economies to Mercantilism?
3. (20) How is the generation and utilization of the surplus product important to
understanding economic development?
4. (20) Construct an argument for which 2 factors were most important in eroding Feudalism
and paving the way for Mercantilism. Use specific examples to support your argument.
5. (20) How did attitudes towards greed (self-interest) change as economic systems evolved?
Does evidence from economic history indicate that humans are primarily group oriented,
self-interested, or a mix of the two?
Study Guide: The readings on economic history will be extremely useful as background for the
essay question on the first exam. In particular, keep in mind how our economic system has
evolved over time, and study the debates over which groups benefit most from the operation
of a capitalist economic system. Also make sure you understand the major economic subjects
taken up in this material, including tradition, authority, markets, classes, surplus product, and
the division of labor. The end of chapter questions are good examples of what exam questions
on this material might look like.
