Tonight, Andy has time to do either 8 math problems or 6 chemistry problems.
What is the scarce resource that is being allocated?
What are the outputs that can be produced?
Draw a production possibility frontier that shows the trade-off between the two outputs. Assume that the trade-off is linear.
What is the opportunity cost of one math problem?
What is the opportunity cost of one chemistry problem?
Is the combination of 4 math problems 2 chemistry problems efficient, inefficient, or infeasible? Is the combination of 2 math problems and 4-1/2 chemistry problems efficient, inefficient, or infeasible? Is the combination of 4-1/2 math problems and three chemistry problems efficient, inefficient, or infeasible?
Suppose that Deborah can do either 10 math problems or 8 chemistry problems.
For Deborah, what is the opportunity cost of one math problem?
For Deborah, what is the opportunity cost of one chemistry problem?
If Andy and Deborah did their homework together, explain how the principle of comparative advantage might guide how they divide up the work.
Suppose that Andy and Deborah traded in a market, where the price of a math problem is expressed in terms of chemistry problems. What is the range of prices for math problems where trade would take place?
Raul is about to start a barber shop. Which of the following costs represents labor? Capital? Land?
renting space in a strip mall
leasing barber chairs
payments to the barbers
After one month, Raul's expenses are $52,000 and his revenues are $60,000. This suggests that his profit is $8,000. How does this differ from his economic profit or economic rent?
Which part of the circular flow does each of the following represent? (firms obtaining resources from households in the factor market; or households obtaining goods and services from firms in the product market)?
I pay Steve to mow my lawn.
I buy stock in a new company.
I get paid by a student to tutor.
I get paid by a school to teach.