Unit 1 Homework Assignment
Assignment 1 (50 points)
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?
1. Explain the importance of the ceteris paribus assumption for an economic model.
1. 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.
1. 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?
1. Which of the following decisions has the greater opportunity cost? Why?
2. A decision to use an undeveloped lot in Tokyo’s financial district for an apartment building.
3. A decision to use a square mile in the desert for a gas station.
1. Why does a production possibilities curve have a bowed-out shape?
1. 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.
1. Why are all costs really “opportunity costs”? What is the opportunity cost of attending class?