ANSWER:
Each of these is an economic issue that illustrates scarcity and the necessity of making choices:
a. The decision as to whether to spend Saturday evening at a basketball game involves weighing the marginal benefit versus the marginal cost. An opportunity cost is associated with going to the basketball game since you could spend the time in other ways, such as studying or working.
b. Attending a Taylor Swift concert requires a sacrifice of both money and time. Individuals face a trade-off between what could be done with the time and the dollars expended acquiring tickets and attending the concert.
c. Since the university offers a limited number of scholarships and many students wish to receive one, the university must decide to whom to allocate these scarce scholarship resources.
312. Maggie is a potter and she likes to dig her own clay for producing pots, cups, and other ceramic items. She is aware of two places where she can obtain the right clay for her work. The first field is quite close, just at the edge of town. The second field is 215 kilometres away and (since there are no easy access roads) requires a half-day of travel just to get there. Compare the opportunity cost of producing pots using clay from each of these fields.
ANSWER:
The opportunity cost of the clay necessary for her work is higher at the second field. Maggie would need to spend more time travelling, consume more gasoline, and use extra time and energy to dig from the second field.
313. If firefighting is dangerous, why would any rational person choose to be a firefighter?
ANSWER:
A rational person might choose to fight fires if, after assessing the potential dangers, they believe the expected marginal benefit from fighting fires outweighs the expected marginal cost.
314. Would it make good sense for a community to seek to reduce its levels of pollution to zero? Why or why not?
ANSWER:
In general it would not make good sense for a community to seek to reduce pollution levels to zero because the costs involved would exceed the benefits received.
315. Farmer Ed could grow wheat and barley. He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on a hectare of his land. The price of wheat is $2.00 per bushel and the price of barley is $0.80. Show the benefits to Ed from specialization. What should he specialize in?
ANSWER:
Farmer Ed could make $150 if he grew only wheat and just $100 if he grew only barley. By specializing in wheat production he will be better off. Even though he can produce more bushels of barley than he can bushels of wheat, his opportunity cost of producing wheat (the $100 income sacrificed) is lower than the opportunity cost of producing barley ($150 in sacrificed income).
316. Market economies are often criticized for how they answer the basic question, "For whom are goods produced?" This criticism usually comes from people who believe that the distribution of income is not "fair." Is there some way to separate production from distribution so that we can make the distribution of income "more fair" without interfering with production?
ANSWER:
Unfortunately, there is no way to totally separate the act of production from the way income is distributed. We know that incentives matter, and tying income to production gives people the incentive to produce. Fairness is a normative concept and reasonable people will disagree over what constitutes a fairer distribution of income. Since incentives matter, any attempt to change the distribution of income is likely to destroy some of the incentives for production.
317. It can be said that, ultimately, consumers are the driving force behind answers to the three basic economic questions faced by societies. Explain the consumer's role in providing these answers.
ANSWER:
What will be produced is directly determined by businesses. However, firms are aware that the way to succeed is to offer products that consumers find desirable. What businesses produce is determined by what they believe consumers want. How goods are produced is determined by firms that seek to reduce the costs of production. Since consumers are price-conscious, they will buy lower-priced products (ceteris paribus).
318. What is a time-series graph and what does it show?
ANSWER:
A time-series graph shows changes over time and is a visual tool that allows us to observe important trends.
319. How do we measure the slope of a linear curve?
ANSWER:
A straight-line curve is called a linear curve. The slope of a linear curve between two points measures the relative rates of change of two variables. Specifically, the slope of a linear curve can be defined as the ratio of the change in the Y value to the change in the X value. The slope can also be expressed as the ratio of the rise to the run, where the rise is the change in the Y variable (along the vertical axis) and the run is the change in the X variable (along the horizontal axis).