Class Activity Chapter 2

ECON 101- Class Assessment 2

*the inside arrows represent the flow of goods and services, the outside arrows show the firms
and households*

1. B
a. Explanation: the firms produce the goods and services ( so the arrow goes from
firms to the market for goods and services) and then the households buy those
goods and services ( so the second B arrow goes from the market to the
households)
b. C= input or factors of production from households to firms
2. A
a. Explanation: spending by households on goods and services, ( which are
produced by firms)
b. D = income for the household
3. B
4. C
5. A
a. Explanation: (750-900) (400-0)
b. What is the opportunity cost for producing glass = how many tires need to be
given up ( use the 0,X) points
c. Opportunity cost of glass= 1000 divided by 900 = 100 tires
i. If looking for opportunity cost of GLASS, use point ((glass)0,(tire)1000)
and put 1000 on top to get the number of tires
d. Opportunity cost of tire =900 divided by 1000= 0.9 glass
6. A
a. Explanation: (0-700)(900-500)
7. C
a. Explanation ( 80,0) on the y axis = there cannot be any washers because they use
the full funds on dryers
8. A
a. Explanation: it’s the only set of numbers that falls on the PPF line
9. C
a. (if a point is underneath the PPF line, it is inefficient)
b. Explanation: there is widespread unemployment in the economy = inefficiency
c. Could also come from:
10. A
a. Explanation: 80-60 dryers, washer is being increased by moving from point A to
point B
11.
Ice cream Books
0 4,000
4,000 2,000
8,0000 0