1.1 What
is an opportunity cost? How does the idea relate to the definition of
economics? Which of the following decisions would entail the greater
opportunity cost: Allocating a square block in the heart of New York
City for a surface parking lot or allocating a square block at the edge
of a typical suburb for such a lot? Explain. LO1
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1.2 Cite
three examples of recent decisions that you made in which you, at least
implicitly, weighed marginal cost and marginal benefit. LO1
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1.3 What is meant by the term "utility" and how does the idea relate to purposeful behavior? LO1
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1.4 What are the key elements of the scientific method and how does this method relate to economic principles and laws? LO2
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1.5 Indicate whether each of the following statements applies to microeconomics or macroeconomics: LO3a. The unemployment rate in the United States was 9.7 percent in March 2010.b. A U.S. software firm discharged 15 workers last month and transferred the work to India.c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges to rise.d. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009.e. Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1 percentage point.f. The consumer price index rose by 2.7 percent from December 2008 to December 2009.
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1.6 State
(a) a positive economic statement of your choice, and then (b) a
normative economic statement relating to your first statement. LO3
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1.7 What
are economic resources? What categories do economists use to classify
them? Why are resources also called factors of production? Why are they
called inputs? LO4
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1.8 Why
is money not considered to be a capital resource in economics? Why is
entrepreneurial ability considered a category of economic resource,
distinct from labor? What are the major functions of the entrepreneur? LO4
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1.9 Specify
and explain the typical shapes of marginal-benefit and marginal-cost
curves. How are these curves used to determine the optimal allocation of
resources to a particular product? If current output is such that
marginal cost exceeds marginal benefit, should more or fewer resources
be allocated to this product? Explain, LO5
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1.10 Explain how (if at all) each of the following events affects the location of a country's production possibilities curve: LO5a. The quality of education increases.b. The number of unemployed workers increases.c. A new technique improves the efficiency of extracting copper from ore.d. A devastating earthquake destroys numerous production facilities.
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1.11 Suppose
that, on the basis of a nation's production possibilities curve, an
economy must sacrifice 10,000 pizzas domestically to get the 1
additional industrial robot it desires but that it can get the robot
from another country in exchange for 9000 pizzas. Relate this
information to the following statement: “Through international
specialization and trade, a nation can reduce its opportunity cost of
obtaining goods and thus ‘move outside its production possibilities
curve.’” LO6
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1.12 LAST WORD
Studies indicate that married men on average earn more income than
unmarried men of the same age and education level. Why must we be
cautious in concluding that marriage is the cause and higher income is the effect?
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