Question

1. Rob took the afternoon off from his job as a tire salesman to mow his lawn. Rob told his wife that this made sense because he would be saving the $50 he would have to pay a lawn service, noting that this would be the opportunity cost to the family. Rob’s wife disagreed. What did Rob’s wife say?
   a.   That Rob just wanted to take the afternoon off.
   b.   The opportunity cost would be Rob’s lost income from selling tires that afternoon.
   c.   The opportunity cost would be Rob’s lost income from selling tires that afternoon plus the $50.
   d.   The opportunity cost would be Rob’s lost income from selling tires that afternoon minus the $50.

2. The division of labor can benefit society only if
   a.   society has no specialized resources.
   b.   society uses all of its resources efficiently.
   c.   a system of exchange exists.
   d.   labor resources are not scarce.

3. In Egypt, in 1970, the Aswan Dam was completed. By preventing the annual flood of the Nile (thereby providing millions of acres of arable land) and by providing electricity, the dam was expected to raise the living standard of the Egyptian people—and it has. However, it has also led to a rise in the water table, which causes Egypt’s limestone structures, including the pyramids, to absorb more salt water and to suffer serious erosion from crystallized salts. Combined with air pollution and traffic vibration, this erosion is turning the pyramids to dust. Economists analyze this type of problem with the concept of
   a.   an externality.
   b.   a free-rider problem.
   c.   the trade-off between equity and output.
   d.   the antiquity problem.
   e.   the public good problem.

Answer 1

1. Ans: Option d; The opportunity cost would be Rob’s lost income from selling tires that afternoon minus the $50.

Explanation:

Opportunity cost refers to lost income(Or benefits) that an individual loses for choosing an alternative over another. Here Rob took the afternoon off from his job as a tire salesman to mow his lawn. Thus he lost the income that he could earn if he did not take that off. But mowing his own land he saves $50.

therefore actual Rob's lost income for choosing the take of alternative i.e. the opportunity cost of taking that off is equal to -

(The lost income for taking day off - $50)

2.Ans: Option c: a system of exchange exists.

Explanation:

Division of labor means a separation of work process where specialized workers are employed at their best-suited jobs. For eg. In a restaurant who can cook good should cook, who can serve good should serve, who has better management ability should manage and finally whatever they earn distributed among them. This separation of work will increase their marginal productivity as they are best at their respective jobs.

  Now suppose after specialization there is no scope for exchange. Consider our example that the cook in our restaurant is not willing to share the cooked food to one who serves then the restaurant will shut-down.

Hence for efficient use of labor besides the division of labor, the existence of a proper exchange system is also required.

3.ans: Option a: an externality

Explanation:

Externality refers to a situation when production or consumption of something by one causes cost or benefit to another. If it costs to others it is known as Negative Externality and if it benefitted other it is known as Positive externality.

Here for protecting Egypt's social life, it's environmental, historical life is affected adversely. Thus it has a Negative externality effect on Egypt.