Question

Prompt: Complete the unit homework questions below and submit them.

1. Why isn’t money considered capital in economics?
2. Which of the following are microeconomic issues? Which are macroeconomic issues?

a. How will an increase in the price of Coca-Cola affect the quantity of Pepsi Cola sold?

b. What will cause the nation’s inflation rate to fall?

c. How does a quota on textile imports affect the textile industry?

d. Does a large federal budget deficit reduce the rate of unemployment in the economy?

3. Explain the importance of the ceteris paribus assumption for an economic model.

4. Analyze the positive versus normative arguments in the following case. What statements of positive economics are used to support the requiring of airbags? What normative reasoning is used?

Should the Government Require Air Bags?

Technological advances continuously provide new high-tech options to save lives that add to the price of cars, such as cameras, radar, and airbags. Airbag advocates say airbags will save lives, and the government should require them in all cars. Airbags add an estimated $600 to the cost of a car, compared to about $100 for a set of regular seat belts. Opponents argue that airbags are electronic devices subject to failure and have produced injuries and death. For example, airbags have killed both adults and children whose heads were within the inflation zone at the time of deployment. Opponents, therefore, believe the government should leave the decision of whether to spend an extra $600 or so for an airbag to the consumer. The role of the government should be limited to providing information on the risks of having versus not having airbags.

5. Suppose a retailer promotes its store by advertising a drawing for a “free car.” Is this car free because the winner pays zero for it?

6. Which of the following decisions has the greater opportunity cost? Why?
7. A decision to use an undeveloped lot in Tokyo’s financial district for an apartment building.
8. A decision to use a square mile in the desert for a gas station.

7. Why does a production possibilities curve have a bowed-out shape?

8. The present choice between investing in capital goods and producing consumer goods now affects the ability of an economy to produce in the future. Explain.

9. Why are all costs really “opportunity costs”? What is the opportunity cost of attending class?

Exhibit 2-15 Production possibilities curve

10. In Exhibit 2-15, evidence of the law of increasing opportunity costs is:

	a.	to get the first 10 capital goods, the economy has to give up 2 consumption goods, but to get the next 10 capital goods, the economy has to give up 8 consumption goods.
	b.	the downward slope of the production possibilities curve.
	c.	the amount of capital goods increases by 10 units as the economy moves from point J to point K to point L to point M to point N.
	d.	the amount of capital goods increases by 10 units as the economy moves from point L to point G.

Answer 1

Capital is a human-made good used to produce other goods and services Money is not a productive resource as it merely facilitates trade so it is not considered as capital in economics.

(a) Microeconomic issue

(b) Macroeconomic issue

(c) Microeconomic issue

(d) Macroeconomic issue

Importance of the ceteris paribus assumption for an economic model: It is difficult to create hypotheses about monetary or economic relationships in a lab setting where the variables of interest could be secluded as economics is all about behavioral changes in the real world.The changes in variable of interest by discovering approaches to hold other factors constant.Thus, the ceteris paribus supposition that is made to demonstrate that these different factors are not changing or influencing the variables of interest.

No,
firstly the winner will have to pay the taxes, upkeep costs, insurance and gas for the car, second retailer (who is promoting the car) had to purchase the car and third valuable limited resources went into the production of the car.

A decision to use an undeveloped lot in Tokyo's financial district for an apartment building has greater opportunity cost since it has to give up the next best thing which is very valuable for Tokyo such as a park.B has low opportunity cost as it cannot be used to grow anything anyway.

Why does a production possibilities curve have a bowed-out shape?

The usual PPF is bowed outward because some resources are more suited to the production of one good than another which is the law of increasing opportunity cost.

Capital goods merchandise, however not giving a prompt advantage, will produce wealth for future use (for more consumer goods and/or more capital goods).The present decision between investing in capital goods and producing products for consumption now affects the ability of an economy to produce in the future.

Utilizing marginal analysis, understudies measures the advantages of going to college against costs.There is a motivating force to go to college when the advantages (improved jpb opportunities, salary, scholarly improvement, public activity, etc) exceed the open door or opportunity cost.

Answer of 10: OPTION (A)