Problems Chapter 2 Homework Activity

Problems Chapter 2 Homework Activity

1. Which of the following goods are scarce? Bold the correct answer (s)
2. garbage
3. salt water in the ocean
4. clothes
5. clean air in a big city
6. dirty air in a big city
7. a public library

2. Suppose the price of a one-way bus trip from Los Angeles to New York City is $150.00. Sarah, a school teacher, pays the same price in February (during the school year) as in July (during her vacation), so the cost is the same in February as in July. Do you agree?

3. List some things that you need. Then ask yourself if you would still want some of those things if the price were five times higher. Would you still want them if the price were 10 times higher?
4. List the opportunity costs of the following:
5. going to college
6. missing a lecture
7. withdrawing and spending $100 from your savings account, which earns 5 percent interest annually
8. going snowboarding on the weekend before final examinations

5. Which of the following activities require marginal thinking, and why?
6. studying
7. eating
8. driving
9. shopping
10. getting ready for a night out
11. Explain why following the rule of rational choice makes a person better off.

7. Which of the following are positive incentives? Negative incentives? Why? Write positive or negative beside the answer and state why.
8. a fine for not cleaning up after your dog defecates in the park
9. a trip to Hawaii paid for by your parents or significant other for earning an A in your economics course
10. a higher tax on cigarettes and alcohol
11. a subsidy for installing solar panels on your house
12. Modern medicine has made organ transplants a common occurrence, yet the number of organs that people want far exceeds the available supply. According to CNN, 10 people die each day because of a lack of transplantable organs, such as kidneys and livers. Some economists have recommended that an organ market be established through which doctors and others could pay people for the right to use their organs when they die. The law currently forbids the sale of organs. What do you think of such a proposal? What kind of incentives would an organ market provide for people to allow others to use their organs? What would happen to the supply of organs if, instead of relying on donated kidneys, livers, and retinas, doctors and hospitals could bid for them? What drawbacks would a free market in organs have? Have you made arrangements to leave your organs to your local organ bank? Would you do so if you could receive $50,000 for them?

9. Throughout history, many countries have chosen the path of autarky, choosing to not trade with other countries. Explain why this path would make a country poorer.

10. Farmer Fran can grow soybeans and corn. She can grow 50 bushels of soybeans or 100 bushels of corn on an acre of her land for the same cost. The price of soybeans is $1.50 per bushel and the price of corn is $.60 per bushel. Show the benefits of specialization to Fran. What should she specialize in?

Show the calculation here

11. Which region has a comparative advantage in the following goods: Write the region beside each one
12. wheat: Colombia or the U.S.?
13. coffee: Colombia or the U.S.?
14. timber: Iowa or Washington?
15. corn: Iowa or Washington?

12. Why is it important that the country or region with the lower opportunity cost produce the good? How would you use the concept of comparative advantage to argue for reducing restrictions on trade between countries?

13. People communicate with each other in the market through the effect their decisions to buy or sell have on prices. Indicate how each of the following would affect prices. Choose one rises or falls for each of the following.
14. People who see an energetic and loveable Jack Russell Terrier in a popular TV series want Jack Russell Terriers as pets. The price of Jack Russell Terriers (rises/falls).
15. Aging retirees flock to Tampa, Florida, to live. The price of housing in Tampa (rises/falls).
16. Weather-related crop failures in Colombia and Costa Rica reduce coffee supplies. The price of coffee (rises/falls).
17. Sugar cane fields in Hawaii and Louisiana are replaced with housing. The price of sugar (rises/falls).
18. More and more students graduate from U.S. medical schools. The wages of U.S. doctors (rises/falls).
19. Americans are driving more and they are driving bigger, gas-guzzling cars such as sports utility vehicles. The price of gasoline (rises/falls).

14. Prices communicate information about the relative value of resources. Which of the following would cause the relative value and, hence, the price, of potatoes to rise?
15. A fungus infestation wipes out half the Idaho potato crop.
16. The price of potato chips rises.
17. Scientists find that eating potato chips makes you better looking.
18. The prices of wheat, rice, and other potato substitutes fall dramatically.