The two most modern forms of economic activity—the free market and the command economy—each have advantages and disadvantages. Consider how scarce business and household resources are allocated, as well as how consumers decide what to consume, how much to consume now, and how much to consume later.
In the problem set for Assessment 1, you will explore the specific methods economists use to examine economic behavior and the economy. You will then look at the economizing problem from both an individual and societal perspective. For the individual, you develop the budget line; for society, the production possibilities model. In discussing production possibilities, the concepts of opportunity costs and increasing opportunity costs, unemployment, growth, and present versus future possibilities are all demonstrated.
Problem Preparation and Submission Guidelines
Form, format, presentation, and appearance are almost as important in accounting and auditing as correct numbers. Poor presentation, in both written work (Word) and spreadsheets (Excel) is an indication of careless thinking and analysis. You cannot earn full credit, even if the solutions are correct, if your work is not presented in a professional manner. On the other hand, it is possible to receive full credit for professionally presented work even if the solution is not absolutely correct.
All submitted written work must include an introduction. Include all relevant facts, dates, persons, et cetera, and a statement of what you are doing and why. Avoid using the first person.
Conclusions must be supported. Numbers and calculations are not self-explanatory. In fact, numbers and calculations are not the analysis. After you perform the calculations, you must then analyze (interpret and explain) the results.
Your analyses, papers, and the like must be prepared “in good and proper form.” That means, for example, when you prepare financial information, your numbers must be aligned on the decimal and right justified. Use commas for thousands. Use underlines and dollar signs appropriately. Every number must be properly labeled and supported with calculations. This does not mean to type or show the formulas. It means to “show” the calculations in statement or schedule (table) form. Do not type formulas, equations, and calculations or show math or equal signs. Your client is not interested in reading formulas.
When finished, submit your completed problems in one file (Word or Excel).
Word file: The cover page must include your name, school, date, assessment number, and problem number. Each problem must begin on a new page with a hard page-break. If you use Word to prepare calculations, prepare them in table form as if it were in Excel. Do not write anything past the margins.
Excel file: The first tab is the cover page with the same information as above. Each problem must be on a separate tab. Each tab must be properly labeled. Note that Excel is not actually required, but if you use Excel, you must use it correctly. One number in one cell and each number (cell) properly labeled. Do not type formulas. You cannot use a calculator in Excel; you must use Excel functions to calculate. Do not write anything past the margins. Use landscape if necessary.
Spelling and grammar errors must be minimal.
Limits, Alternatives and Choices
Before you begin Assessment 1, make sure you have downloaded and read the Helpful Hints for Learners and Problem Preparation and Submission Guidelines documents, linked in the Resources under Capella Resources.
Then, review the following economic problems and respond to each.
Below is a production possibilities table for consumer goods (butter) and capital goods (guns).
|Type of Production
||Production Alternative A
||Production Alternative B
||Production Alternative C
||Production Alternative D
||Production Alternative E
||Production Alternative F
||Production Alternative G
Graph the data in the table using Excel. Then, answer the following questions:
- What are the specific assumptions that underlie the production possibilities curve?
- What would be the cost of more butter, if the economy is at point C? What would be the cost of producing more guns? How does the shape of the production possibilities curve reflect the law of increasing opportunity costs?
- Suppose this hypothetical economy were producing only 1 item of butter and 10 guns, and this was depicted by this production possibilities table and curve. What conclusions could you draw about this economy’s resource utilization?
- Can this economy produce outside its current production possibilities? How can technological changes affect the production possibilities curve? How can international trade permit consumption above its production possibilities curve?
- What is an opportunity cost?
- How does this concept relate to the definition of economics?
- Which of the following decisions would entail the greater opportunity cost: allocating advertising expenditures to boost sales—or investing in a new plant and equipment? Explain.
Cite four examples of recent decisions that you made in which you, at least implicitly, weighed marginal cost and marginal benefit.
Attached is the Helpful Hints Document
Economic Problems, Set 1 Scoring Guide
Economic Problems, Set 1 Scoring Guide Grading Rubric
|Analyze solutions with support from relevant data, resources, references, and economic principles.
||Does not identify solutions using relevant data, resources, references, and economic principles.
||Identifies solutions with support from appropriate data, resources, references, and economic principles.
||Analyzes solutions with support from relevant data, resources, references, and economic principles.
||Interprets solutions using relevant data, resources, references, and economic principles, with correct data and written work to support conclusions.
|Analyze graphed data referencing the possibility curve to develop assumptions.
||Does not identify graphed data referencing the possibility curve to develop assumptions.
||Identifies graphed data referencing the possibility curve to develop assumptions.
||Analyzes graphed data referencing the possibility curve to develop assumptions.
||Interprets graphed data referencing the possibility curve to develop assumptions about opportunity costs, economy, available resources, and the possibilities of production.
|Analyze the concept of opportunity cost.
||Does not identify the concept of opportunity cost.
||Identifies the concept of opportunity cost.
||Analyzes the concept of opportunity cost.
||Interprets the concept of opportunity cost with correct data and written work to support conclusions.
|Apply the concept of marginal cost and marginal benefit.
||Does not define the concept of marginal cost and marginal benefit.
||Defines, but does not apply, the concept of marginal cost and marginal benefit.
||Applies the concept of marginal cost and marginal benefit.
||Applies the concept of marginal cost and marginal benefit, and identifies areas of uncertainty, knowledge gaps, and/or additional information that would be needed in order to gain a more complete understanding.