Galaxy grossed $94 million.
a. How will the success of Guardians of the Galaxy influence the opportunity cost
of hiring Chris Pratt?
The opportunity cost of something is the highest-valued alternative that must be given up to
get it.
Based on the success of Guardians of the Galaxy, Chris Pratt will now require a higher salary
to star in a movie. The extra money that is paid to Chris Pratt could have been used to hire
other actors or to film more on location. The best alternative that is forgone because Chris
Pratt is paid more money is the opportunity cost of hiring him.
b. How have the incentives for a movie producer to hire Chris Pratt changed?
Because Chris Pratt is now a proven actor who can draw in large first-weekend box office
revenues, movie producers have a greater incentive to hire him. Since Guardians of the
Galaxy was a hit, it is probable that Chris Pratt's future films will also be hits.
8 CH AP TER 1
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11. What might be an incentive for you to take a class in summer school? List some
of the benefits and costs involved in your decision. Would your choice be
rational?
Early graduation, smaller class sizes, and retaining eligibility for a scholarship are examples of
incentives that encourage taking summer classes. The benefits from taking summer classes
might include more personal attention from the instructor and increased knowledge about
some aspect of the world. Costs include forgone summer jobs or internships, less time to
spend with friends, and additional tuition and other class-related expenses. The choice is
rational if the student achieves the greatest benefit over cost.
12. Look at today’s National Post. What is the leading economic news story? With
which of the big economic questions does it deal and what tradeoffs does it
discuss or imply?
On December 5, 2016, a top economic news story discussed was “Amazon testing retail store
that eliminates checkout line, charges shoppers as they leave”. This news stories answers the
following questions:
What goods and services are produced? The news story deals with the production of check-
out services by Amazon.
How are goods and services produced? The news story tells that Amazon is producing check-
out services using a combination of artificial intelligence software—including computer vision
algorithms that enable machines to identify images—and sensors.
A tradeoff is giving up one thing to get something else. When Amazon uses cashier-less
technology, it gives up using traditional check-out methods.
13. Provide two microeconomic statements and two macroeconomic statements.
Classify your statements as positive or normative. Explain why.
Microeconomic statements are: Fewer deep water oil wells should be drilled off the B.C.
coast. If less oil is produced, the price of oil will rise. The first statement is normative because
it relies on what the person thinks “should” be done. The second statement is positive
because it is possible to test the effect of less oil being produced.
Macroeconomic statements are: The current unemployment rate is too high. The current
unemployment rate is higher for men than for women. The first statement is normative
because it depends on what is deemed “too high.” The second statement is positive because
it can be checked to determine its validity.
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WH AT IS ECO NO MICS? 9
A n s w e r s t o t h e A p p e n d i x R e v i e w Q u i z
Page 30
1. Explain how we “read” the graphs in Figs. A1.1 and A1.2.
The points in the graphs relate the quantity of the variable measured on the one axis to the
quantity of the variable measured on the other axis. The quantity of the variable measured on
the horizontal axis (the x-axis) is measured by the horizontal distance from the origin to the
point. The quantity of the variable measured on the vertical axis (the y-axis) is measured by
the vertical distance from the origin to the point. The point relates these two quantities. For
example, in Figure A1.2a, point A shows that at a price of $8.43 a ticket, 1.3 billion movie
tickets are sold.
2. Explain what scatter diagrams show and why we use them.
A scatter diagram is a graph that plots the value of one variable against the value of another
variable for a number of different values of each variable. We use scatter diagrams because
they quickly reveal if a relationship exists between the two variables.
3. Explain how we “read” the three scatter diagrams in Figs. A1.3 and A1.4.
The scatter diagram in Figure A1.3 shows the relationship between production budgets and