Question

1)Why would an economist argue that tuition is not the largest cost of attending a state university?

2) Explain what probably happened to the production possibility frontier during the Black Plague.

3)Explain why we should not expect to see zero percent unemployment.

Answer 1

1. An economist knows that while calculating economic cost or profit we look at opportunity cost of the good and services consumed.

The largest cost of attending a state university would be the opportunity cost of enrolling in the university for education and the opportunity cost for the student would be equal to the earnings forgone if he had taken up a job rather than attending the university.

2. During the Black Plague thousands of people died and economic activities decreased drastically which led to fall in output of goods and services. This would shift the production possibility frontier to the left.

3. We shouldn't expect to see zero percent unemployment as there are various forms of unemployment such as frictional unemployment which are due to reasons such as people changing jobs and not because of non-availability of jobs. While people look for other jobs which is inevitable, they are expected to remain unemployed for that short duration of time.