Points possible: 30

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ECONOMICS!

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Playing the Game

1.2.4 Practice: What's in It for You?

Practice Assignment

U.S. and Global Economics Core (S2939626) Name: ____________________

Points possible: 30 Date: ____________

Answer the questions below to explore the effects of the free-market system.

1. Describe two benefits you enjoy because of the free-market system. Be sure to state why the free-market system brings each of these benefits. (10 points)

Benefit:

Connection to free market:

Benefit:

Connection to free market:

2. Explain why the free-market system brings efficiency as well as freedom. (10 points)

3. Describe how security is handled in the free-market system. Give an example to support your answer. (10 points)

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Example:

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1.3.2 Practice: You Do the Math

Practice Assignment U.S. and Global Economics Core (S2939626) Name: ____________________

List as many of the costs and benefits of each decision below as you can. It's natural for some decisions to have more costs or benefits than others, so don't worry about having equal-sized lists. As you answer these questions, keep in mind that cost includes many factors such as money, time, effort, and sacrifices. Also remember that both costs and benefits are subjective, so a cost to you might actually be a benefit to someone else and vice versa. (30 points total)

1. Completing these questions instead of doing something else

Costs:

Benefits:

2. Getting a job after high school instead of going to college

Costs:

Benefits:

3. Going straight from high school into college

Costs:

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4. Taking a year off after graduating high school

Costs:

Benefits:

5. Going to a less expensive public school and getting a full-time job to pay for tuition as you go

Costs:

Benefits:

6. Getting student loans in order to pay for a more expensive private college and not working while you go to school

Costs:

Benefits:

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2.1.3 Practice: Playing Your Part

Answer the following questions based on what you have learned about the roles of consumers and producers.

1. Explain why the role of a consumer is important in an economic system, and give two examples of someone playing the role of consumer. (10 points)

Explanation:

Example:

2. Describe the role played by the producers in an economic system, and give two examples of someone being a producer. (10 points)

Description:

Example:

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3. Explain how the government is both a consumer and a producer and give one example of the government playing each role. (10 points)

Government is a consumer because:

Example:

Government is a producer because:

Example:

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3.2.4 Practice: You Do the Math

Practice Assignment

The table below shows the annual income and hourly wage associated with two benchmark income levels. Use this information to help you answer the question below.

Hourly Wage

Annual Income

2012 U.S. federal poverty line for a family of four $11.78 $23,550 2012 U.S. median household income $25.69 $51,371

Data sources: U.S. Department of Health and Human Services and the U.S. Census Bureau

For each of the professions in the left column, calculate the annual pay based on full-time, year-round employment consisting of 2,000 hours a year (40 hours per week for 50 weeks per year). Record your calculations under "Annual income" in the table. Then, find the difference between each annual wage figure and a) the poverty threshold and b) the median household income. If the difference is a negative number, record it as such. (30 points)

Hourly wage Annual income Difference

between annual wage and federal poverty line Difference between annual wage and median household income Federal minimum wage $7.25 California's minimum wage $8.00 Marketing managers $55.65 Police officers $27.40 Child-care workers $9.38

Data source: U.S. Bureau of Labor Statistics

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4.1.5 Practice: Creating and Destroying Money

Practice Assignment

Describe the effect each action below will have on the money supply and explain your reasoning. (6 points each)

1. The Fed raises the discount rate from 5 percent to 10 percent.

2. The required reserve ratio is lowered from 20 percent to 10 percent.

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4. The Fed buys $5 billion worth of Treasury bonds on the open market.

5. Banks decide to keep more of their assets as reserves in order to avoid risking a shortage of the required reserve.

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4.4.3 Practice: The Loan Ranger

Answer the following questions about different loan scenarios faced by businesses. Use the online loan calculator located at http://www.loancalculator.org/ to help you do your calculations.

1. The owners of a successful restaurant want a loan for $50,000 to renovate the kitchen and expand the dining room. They expect that the extra tables will add between $2,000 and $5,000 to the restaurant’s monthly revenue. The bank is willing to let the business have an intermediate-term loan of $50,000 for five years at an interest rate of 6.5 percent. Calculate the monthly payment and explain whether taking this loan is a smart business decision. (10 points)

2. A landlord wants to acquire an additional apartment building for $250,000. The new building contains eight apartment units, which will each rent for $500 per month. The bank is willing to loan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate. Calculate the monthly payment and explain whether taking this loan for the new building is a smart business decision. (10 points)

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5.2.3 Practice: Public or Private?

Practice Assignment

Consider the following scenarios. Use what you have learned to decide if the goods and services being provided are individual, public, or merit goods. For each case, state what kind of good has been described and explain your answer using the definitions of individual, public, and merit goods. (6 points each)

1. From your window, you can see a city block that's on fire. You watch city firefighters rescue people and battle the flames to save the buildings.

2. While visiting relatives, you learn that your cousins attend a nearby elementary school that is supported financially by local property tax revenue.

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4. You find out that your aunt works for a defense manufacturing company that has several defense contracts with the government. She tells you that she works for a team that is producing a communications satellite.

5. Your class visits a local jail run by a private, profit-making company that detains county criminals and is paid with tax revenue.

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6.1.4 Practice: You Do the Math

Practice Assignment

Fill out the tables for each scenario and answer the question that follows. Use $7.25 as the minimum wage and remember that employees in the United States must be paid time-and-a-half (1.5 times the normal hourly rate) for each hour worked over 40 hours per week.

Scenario 1. A team of three laborers in Mongolia makes rugs by hand for export to the United States. The team makes 12 rugs per year working 14 hours a day, six days a week, 50 weeks a year. Each laborer is paid a wage equivalent of $1.10 per day.

The materials for each rug cost $50, and the company that sells the rugs has fixed costs of $10,000 per year for things such as energy, rent, and administrative and shipping costs.

Each rug sold for $2000 in the United States. Total Labor Cost Total Materials

Cost

Fixed Costs Total Revenue Profit

(3 points) (1 point) (1 point) (2 points) (3 points)

If a team of three workers, each making the U.S. federal minimum wage, produced these 12 rugs, what would the total labor cost be? Don't forget that these workers would be working overtime. (5 points)

Scenario 2. A team of five laborers working in a garment factory in Indonesia divides the task of making men's dress shirts for export to the United States. Each laborer works 10 hours a day, six days a week, and is paid the Indonesian minimum wage of $2.50 per day. In one week, the team can make 500 shirts. The company spends $10,000 each week to cover advertising, administration, machinery, transportation, and other expenses. Each shirt sold for $40 in the United States.

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(2 points) (2 points) (2 points)

$10,000

(2 points) (2 points) How much would it cost to pay five workers at the U.S. federal minimum wage to do the same job in the same amount of time? (5 points)

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7.1.4 Practice: Take It or Leave It

Practice Assignment

1. Consider the two jobs described below and answer the questions in the table to help you compare and contrast their pros and cons. (20 points)

Job A. This job involves writing advertisements and creating art to go along with the text. It pays well, though advancing in this field takes many years. The employer tells you that you are likely to work a lot of overtime hours. The office is located far across town, involving a long bus ride or drive. The people at the office seem very nice. The work atmosphere is formal, as is the dress code.

Job B. This job involves filling out and filing paperwork. The entry-level pay is low, but there are many opportunities within the company. The employer tells you that the company prefers to "promote from within," or fill vacant jobs by promoting people who already work at the company. The building is a short bus ride, bike ride, or walk from where you live. The people at the office are friendly and helpful, and the whole office has a casual atmosphere.

Job A Job B

What are the benefits?

What are the monetary costs?

What are the nonmonetary costs?

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What are the opportunity costs?

Do the benefits outweigh the costs?

2. Which of these two jobs would you take if they were your only two offers? Explain your reasoning. (10 points)

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7.3.3 Practice: You Do the Math

Practice Assignment

1. Figure out the costs of buying the two cars listed below by filling in the blanks in the table. You can pay a 10 percent down payment, and your credit history is good enough to get a five-year loan with an interest rate of 5 percent. To determine the monthly payment and interest paid, use an online loan calculator - for

example: http://www.loancalculator.org/ . Put in the amount to borrow, 5 percent interest rate and 5 years. (24 points)

New Honda CR-V Used Ford Taurus

Price $22,000 $9,500 Sales tax $1,980 $855 Total cost Down payment Amount to borrow Monthly payment

Total amount of payments Total interest paid

2. If you were going to buy one of these two cars tomorrow, which car would you choose? Explain your choice. (6 points)