Economics, 9th Edition Solution Manual

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Chapter 01-Economics and Economic Reasoning1-1Chapter 1:Economics and Economic ReasoningQuestions and Exercises1.Coordination refers to how the three central problems facing any economy aresolved. Those three problems are what and how much to produce, how toproduce, and for whom to produce. Inevitably,individuals desire more than isavailablein light ofhow much they’re willing to work, causing a problem ofscarcity. The concept of scarcity has two elements:our wants and our means offulfilling those wants. Those two elements are interrelated since wants arechangeable andarepartially determined by society and the means of fulfillingthose wants. In addition, the degree of scarcity is constantly changing,dependingon the available means of production and the development of new wants.Therefore, the author of the textbook focused on coordination instead of scarcityto emphasize the subsidiary nature of scarcity to the overall concept ofcoordination. Economics is not merely about our wants or the means of fulfillingthose wants; it is also about reconciling our wants with reality, where realityconsists of decision-making mechanisms, social customs, and political realities.2.a.Macro.b.Micro.c.Macro.d.Micro.e.Micro.f.Micro.3.Answers will differ.Two microeconomic problems are the pricing policies offirms (price-fixing in particular) andthe waywages are determined in labormarkets. (Why do athletes and celebrities make so much money,anyway?) Twomacroeconomic problems are unemployment and inflation (business cycles andgrowth are also macroeconomic problems).4.a.The opportunity cost of attending college is the sacrifice one must maketoattendcollege. It can be estimated by figuring out the benefit of the next-best alternative.If that alternative is working, one would guess the likely wage that could beearned at a job that does not require a college degree and then multiply by 40hours for each week in college. The opportunity cost is also what could be donewith the money used for tuition and other costs related to attending college.b.The opportunity cost of taking a course could be estimatedbyusing the sametechnique as in partaif you otherwise would be workingduringthese hours. Ifyou had taken another course instead, the opportunity cost would be the benefityou would have received from takingthe othercourse.c.The opportunity cost of attending yesterday’s lecture would depend on what youotherwise could have done with the time (sleep? eat lunch with an interestingperson?). Although this is no longer a choice to you, past activities do haveopportunity costs.

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