Questions On The Biggest Opportunity Cost Essay

Questions On The Biggest Opportunity Cost Essay

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CHAPTER 1

Questions:
3. The biggest opportunity cost would come from allocating a square block in the heart of New York City for a surface parking lot. The reason for this is because the value of a square block in the heart of New York City would command a much higher price than one of just a suburb. Therefore, the sacrifice, or opportunity cost, would be greater giving up a block in the heart of New York city.

7. a. Macroeconomics
b. Microeconomics
c. Macroeconomics
b. Macroeconomics
e. Microeconomics
f. Macroeconomics

8. According to the book, economic resources are natural, human, and manufactured resources that are classified as land, labor, capital, and entrepreneurial ability; all of which are used in the production of goods and services (pg. 426). These resources are also called factors of production because they assist within the production process. They are also inputs because the goods and services are ingredients to help with the final production output.


Problems:
3.
a.
PRODUCT A B C D E F
Candy Bar 0 4 8 12 16 20
Peanuts 10 8 6 4 2 0


20
Candy Bars


b. Slope is -2 of the budgeted line, the opportunity cost of another candy bar is .5 a bag of peanuts, and the opportunity cost of another peanut is 2 candy bars. With that being said, the opportunity costs are constant, this can be explained by looking at the consumption alternatives chart above.

c. You would have to use your own judgment or preference for candy bars and the peanuts to be able to determine what combination to buy because the budget line and the consumption alternatives does not tell you which of the available combinations to buy.

d. This would increase; the $30 budgeted line would be more prefreable to the old one bea...


... middle of paper ...


...f Private Goods
In order for an increase in production of public goods, the economy must move upwards on the production possibility curve; therefore, if the economy moves from point c to point d, then production of public goods will increase from Q2 to Q4, but then private goods will then decrease from Q1 to Q3. If the economy is operating inside the production possibility curve, resources are either underutilized or resources are not being used. Output of public goods would only increase if the economy starts to utilize more of the resources and use resources that are not at all being used. Public goods and private goods will both increase in this case.

Problems:
6. 20%, 15%, and 13.33% (using the average tax rate = tax paid/income then x100)
From this we can determine that tax is regressive, the average tax rate declines as the income increases.

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