Answer: Fertilizer is used to help produce the pumpkins, so it is a partial answer to the "How are goods and services produced?" question.
Topic: Economic questions, how
Skill: Level 3: Using models
Section: Checkpoint 1.1
Status: Old
AACSB: Reflective thinking
8) Different nations answer the what, how, and for whom questions differently. China, for instance, builds dams using many workers and only a little capital equipment. The United States builds dams using a few workers and a lot of capital equipment. Which economic question are these two nations answering and why do the answers differ?
Answer: The nations are answering the "how" question because they are determining how to produce a dam. In the main part, the answers differ because the nations have different amounts of capital equipment and labor. China has more people and less capital equipment. Hence it makes sense for China to build dams using many workers and only a little capital equipment. The U.S. has more capital equipment and less labor. Thus it makes sense for the United States to build dams using a lot of capital equipment and only a few workers.
Topic: Economic questions, how
Skill: Level 4: Applying models
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
9) The question "Will doctors or lawyers have higher annual incomes?" represents which of the three basic economic questions?
Answer: The amount of goods and services a person can purchase depends on the person's income. Hence the question of who should be paid more, lawyers or doctors, essentially asks whether lawyers or doctors will be able to buy more goods and services. Thus the question is a microeconomic "For whom?" question.
Topic: Economic questions, for whom
Skill: Level 3: Using models
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
1.7 Essay: The Economic Way of Thinking
1) What is the difference between microeconomics and macroeconomics?
Answer: Microeconomics studies the decisions of smaller economic actors, such as individual consumers or individual firms, and how the government can affect these decisions, say through how it regulates an industry. Macroeconomics studies the aggregate, or economy-wide, consequences of the decisions made by individuals and firms. Macroeconomics also studies the aggregate effects of government policies, such as the Federal Reserve's decisions to raise or lower interest rates.
Topic: Microeconomics and macroeconomics
Skill: Level 2: Using definitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
2) What is an opportunity cost? Give an example.
Answer: An opportunity cost of something is the best thing you must give up to get it. For example, the cost of attending class might be the extra hour of sleep you lose, or the opportunity cost of buying a taco might be the soda you can no longer buy.
Topic: Opportunity cost
Skill: Level 1: Definition
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
3) Your friend is preparing for this exam and in your practice session makes the following statement: "Instead of attending microeconomics class for two hours, Kiki could have played tennis or watched a movie. Therefore, the opportunity cost of attending class is the tennis and the movie she had to give up." Is your friend's analysis correct or not? Explain your answer.
Answer: Your friend's analysis is incorrect. The opportunity cost of an action is the (single) best thing she had to give up, not all the things she had to give up. Kiki's opportunity cost of studying for her exam is either the tennis or the movie, whichever she would have done had she not studied.
Topic: Opportunity cost
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
4) Rather than go out to eat by yourself, you decide to stay at home and fix dinner for yourself and your two roommates. Your roommates applaud your decision. Your roommates tell you that your decision to eat at home has no opportunity cost because you already have all the dinner ingredients in your pantry. Is this comment correct?
Answer: Your roommates' comment is incorrect. The opportunity cost of preparing dinner at home is whatever is the best thing you give up, which, given your choice boiled down to staying home or going out, is going out to eat. Hence the opportunity cost of fixing dinner at home is going out to eat.
Topic: Opportunity cost