Chapter 01-Limits, Alternatives, and Choices1-1Chapter 01-Limits, Alternatives, and ChoicesMcConnell Brue Flynn,BarbieroMicro14ceDISCUSSIONQUESTIONS1.What is an opportunity cost? How does the idea relate to the definition of economics? Which ofthefollowing decisions would entail the greater opportunity cost: Allocating a square block in theheart of NewYork City for a surface parking lot or allocating a square block at the edge of atypical suburb for such alot? Explain.LO1.2Answer:An opportunity cost is what was sacrificed to do or acquire something else. Thecondition of scarcity creates opportunity cost. If there was no scarcity, there would be noneed to sacrifice one thing to acquire another.The opportunity cost would be much higher inTorontoas the alternative uses for thatsquare block are much more valuable than for a typical suburban city block.2.Cite three examples of recent decisions that you made in which you, at least implicitly,weighedmarginal cost and marginal benefit.LO1.2Answer:Student answers will vary, but may include the decision to come to class, to skipbreakfast to get a few extra minutes of sleep, to attend college, or to make a purchase.Marginalbenefitsofattendingclassmayincludetheacquisitionofknowledge,participationindiscussion,andbetterpreparationforanupcomingexamination.Marginal costs may include lost opportunities for sleep, meals, or studying for otherclasses.In evaluating the discussion of marginal benefits and marginal costs, be carefulto watch for sunk costs offered as a rationale for marginal decisions.3.What is meant by the term “utility” and how does the idea relate to purposeful behaviour?LO1.2Answer:“Utility” refers to the pleasure, happiness, or satisfaction gained from engagingin an activity (eating a meal, attending a ball game, etc.). It is an important component ofpurposeful behavior because people will allocate their scarce time, energy, and money inan attempt to gain the most utility possible.4.What are the key elements of the scientific method and how does this method relate toeconomicprinciples and laws?LO1.3Answer:The key elements include the gathering of data (observation), the formulation ofpossible explanations(hypothesis), testing the hypothesis, determining the validity of thehypothesis, and repeated testing of hypotheses that have appeared to be valid in priortests.The scientific method is the technique used by economists to determine economic laws orprinciples. These laws or principles are formulated to explain and/or predict behavior ofindividuals or institutions.Preview Mode
This document has 350 pages. Sign in to access the full document!