Chapter 1 - Summary Macroeconomics PDF

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Discussion Questions 1. What is opportunity cost? How does it relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: Allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain. a. Opportunity cost - what you give up to get what you want b. It relates to the definition of economics because opportunity cost increases the scarcity c. Allocating a square block at the edge of a typical suburb because you are giving up less to have a better place. If you were to take a piece out of the heart of NYC - you would lose the business that might be produced there 2. Cite three examples of recent decisions that you made in which you at least implicitly, weighted marginal cost and marginal benefit. a. The decision to sleep later and not eat a real breakfast b. The decision to go to the gym instead of sitting and watching netflix 3. What is meant by the term “utility” and how does the idea relate to purposeful behavior? a. The term utility means satisfaction and it relates because 4. What are the key elements of the scientific method and how does this method relate to economic principles and laws? a. Observing the real world behavior and outcomes b. Hypothesizing c. Testing the hypothesis d. Accepting, rejecting or adapting the hypothesis e. An economic principle is a statement about the economic behavior that help predict the effects of certain actions 5. State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement. a. The produce is $3 per lb b. The produce is too expensive 6. How does the slope of a budget line illustrate opportunity costs and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes? a. Budget lines are always downwards because it shows when you increase one, you decrease the other. The decrease is the opportunity cost. b. With the budget line going downwards it shows there will never be an increase in goods. 7....