Question

1. In order to reduce excessive drinking, the government of city A imposes a heavy tax on the sales of alcoholic drinks.

(a) Is it a positive incentive?

(b) Explain why this policy will increase the number of deaths related to alcohol drinking.

2. Adam is accepted into the following four universities. He prefers the 4 universities in the following descending order. He can go to only one of the universities.

i. Eastern Washington University

ii. Seattle Pacific University

iii. UW Seattle

iv. Western Washington University

(a) What is the opportunity cost for Adam to go to Eastern Washington University?

(b) What is the opportunity cost for Adam to go to Seattle Pacific University?

c) Suppose that Seattle Pacific University offers Adam a scholarship, and now he prefers Seattle Pacific University over Eastern Washington University. Yet Adam’s mom forces him to go to UW Seattle. What is the opportunity cost for Adam to go to UW Seattle?

Answer 1

1. A. Yes it is a positive incentive as the Tax rates are higher the price of Alchohol will also equally rise and go up which means people who are now affording to drink will 1. Reduce the consumption pattern and 2. May even quit drinking

B. People who are addicted however and are compulsive drinkers will however adopt to criminal methods to continue having money to buy alcohol this will directly impact an increase in the crime rate. Should the drinking pattern not get altered people will be subjected to buying spurious liquor thereby putting their life at stake

2.

A. The opportunity cost of Adam going to Eastern Washington university is a compromise on the better facilities he may get at the other 3 universities

b. The opportunity cost of Adam going to Seattle pacific university may be a distance reloaction from his home town if Seattle is not his and also a higher cost involved in accommodation, food and other living expenses

c. The opportunity cost is the loss of scholarship and other benefits that would accrue