Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 1 - Part I - Ten Principles of Economics - Problems and Applications: 1

Answer

(a) A family deciding whether or not to buy a new car faces a tradeoff in terms of what they could buy with the money spent on the car. This could be a television, bicycles, vacations, or something completely different. (b) The tradeoff is the other things money allocated towards national parks could've been spent on. Examples of these things include infrastructure, social welfare, and improved education. (c) Opening a new factory can pose financial constraints in the short term for the company. For instance, if the company is unable to hire enough workers, it may have to transfer in workers from previously established factories, subsequently decreasing the productivity of other factories. This money could've also been spent on other forms of capital investment. Namely, the factory owner could've invested in better, more efficient technology. (d) If the professor prepares more for the class than he/she is using time that he/she could've used doing an alternative like sleeping or swimming. If the professor prepares less, the opportunity cost is time which could've been spent preparing for class. (e) If the graduate goes to school they are forgoing time which could be spent beginning a career. Additionally, they are losing whatever amount of money is spent on graduate school tuition.

Work Step by Step

When assessing trade-offs, the trade-off is opportunity cost — the next most valuable alternative(s) being forgone when one opts to follow through with a specific action.
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