Principles of Economics

Steven A. Greenlaw, David Shapiro

Chapter 2

Choice in a World of Scarcity - all with Video Answers

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Chapter Questions

Problem 1

Suppose Alphonso's town raised the price of bus tickets to $\$ 1$ per trip (while the price of burgers stayed at $\$ 2$ and his budget remained $\$ 10$ per week.) Draw Alphonso's new budget constraint. What happens to the opportunity cost of bus tickets?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 2

Retum to the example in Figure $2.4 .$ Suppose there is an improvement in medical technology that enables more healthcare with the same amount of resources. How would this affect the production possibilities curve and, in particular, how would it affect the opportunity cost of education?

Md.Daniyal Arshad

Md.Daniyal Arshad

Numerade Educator

Problem 3

Could a nation be producing in a way that is allocatively efficient, but productively inefficient?

Srikar Katta

Numerade Educator

Problem 4

What are the similarities between a consumer's budget constraint and society's production possibilities frontier, not just graphically but analytically?

Mihir Nayar

Numerade Educator

Problem 5

Individuals may not act in the rational, calculating way described by the economic model of decision making, measuring utility and costs at the margin, but can you make a case that they behave approximately that way?

Srikar Katta

Numerade Educator

Problem 6

Would an op-ed piece in a newspaper urging the adoption of a particular economic policy be a positive or normative statement?

Mihir Nayar

Numerade Educator

Problem 7

Would a research study on the effects of soft drink consumption on children's cognitive development be a positive or normative statement?

Mihir Nayar

Numerade Educator

Problem 8

Explain why scarcity leads to tradeoffs.

Mihir Nayar

Numerade Educator

Problem 9

Explain why individuals make choices that are directly on the budget constraint, rather than inside the budget constraint or outside it.

Mihir Nayar

Numerade Educator

Problem 10

What is comparative advantage?

Mihir Nayar

Numerade Educator

Problem 11

What does a production possibilities frontier illustrate?

Srikar Katta

Numerade Educator

Problem 12

Why is a production possibilities frontier typically drawn as a curve, rather than a straight line?

Mihir Nayar

Numerade Educator

Problem 13

Explain why societies cannot make a choice above their production possibilities frontier and should not make a choice below it.

Srikar Katta

Numerade Educator

Problem 14

What are diminishing marginal returns?

Mihir Nayar

Numerade Educator

Problem 15

What is productive efficiency? Allocative efficiency?

Jennifer Stoner

Jennifer Stoner

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Problem 16

What is the difference between a positive and a normative statement?

Mihir Nayar

Numerade Educator

Problem 17

Is the economic model of decision-making intended as a literal description of how individuals, firms, and the governments actually make decisions?

Srikar Katta

Numerade Educator

Problem 18

What are four responses to the claim that people should not behave in the way described in this chapter?

Mihir Nayar

Numerade Educator

Problem 19

Suppose Alphonso's town raises the price of bus tickets from $\$ 0.50$ to $\$ 1$ and the price of burgers rises from $\$ 2$ to $\$ 4 .$ Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso's weekly spending money increases from $\$ 10$ to $\$ 20 .$ How is his budget constraint affected from all three changes? Explain.

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator

Problem 20

During the Second World War, Germany's factories were decimated. It also suffered many human casualties, both soldiers and civilians. How did the war affect Germany's production possibilities curve?

Mihir Nayar

Numerade Educator

Problem 21

It is clear that productive inefficiency is a waste since resources are used in a way that produces less goods and services than a nation is capable of. Why is allocative inefficiency also wasteful?

Sandile Ndlovu

Numerade Educator

Problem 22

What assumptions about the economy must be true for the invisible hand to work? To what extent are those assumptions valid in the real world?

Mihir Nayar

Numerade Educator

Problem 23

Do economists have any particular expertise at making normative arguments? In other words, they have expertise at making positive statements (i.e., what will happen) about some economic policy, for example, but do they have special expertise to judge whether or not the policy should be undertaken?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 24

Use this information to answer the following 4 questions: Marie has a weekly budget of $\$ 24,$ which she likes to spend on magazines and pies.
If the price of a magazine is $\$ 4$ each, what is the maximum number of magazines she could buy in a week?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 25

Use this information to answer the following 4 questions: Marie has a weekly budget of $\$ 24,$ which she likes to spend on magazines and pies. If the price of a pie is $\$ 12,$ what is the maximum number of pies she could buy in a week?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 26

Use this information to answer the following 4 questions: Marie has a weekly budget of $\$ 24,$ which she likes to spend on magazines and pies. Draw Marie's budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 27

Use this information to answer the following 4 questions: Marie has a weekly budget of $\$ 24,$ which she likes to spend on magazines and pies.
What is Marie's opportunity cost of purchasing a pie?

Kratika Bhadauria

Kratika Bhadauria

Numerade Educator