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Chapter 2: Q 2.3 (page 27)
Discuss why obtaining increasing increments of any particular good typically entails giving up more and more units of other goods.
Because the to produce any one good we use the resources of the other good.
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You and a friend decide to spend \(100 each on concert tickets. Each of you alternatively could have spent the \)100 to purchase a textbook, a meal at a highly-rated local restaurant, or several Internet movie downloads. As you are on the way to the concert, your friend tells you that if she had not bought the concert ticket, she would have opted for a restaurant meal, and you reply that you otherwise would have downloaded movies. Identify the relevant opportunity costs for you and your friend for the concert tickets that you purchased. Explain briefly.
A nation鈥檚 residents can allocate their scarce resources either to producing consumer goods or to producing human capital鈥攖hat is, providing themselves with training and education. The following table displays the production possibilities for this nation:
| Production Combination | Units of Consumer Goods | Units of Human Capital |
| A | 0 | 100 |
| B | 10 | 97 |
| C | 20 | 90 |
| D | 30 | 75 |
| E | 40 | 55 |
| F | 50 | 30 |
| G | 60 | 0 |
(a) Suppose that the nation鈥檚 residents currently produce combination A. What is the opportunity cost of increasing the production of consumption goods by 10 units? By 60 units?
(b) Does the law of increasing additional costs hold true for this nation? Why or why not?
Using only the concept of comparative advantage, evaluate this statement: 鈥淎 professor with a Ph.D. in physics should never mow his or her own lawn, because this would fail to take into account the professor's comparative advantage."
The following table illustrates the points a student can earn on examinations in economics and biology if the student uses all available hours for study. Plot this student鈥檚 production possibilities curve. Does the PPC illustrate the law of increasing additional costs?
| Economics | Biology |
| 100 | 40 |
| 90 | 60 |
| 80 | 75 |
| 70 | 85 |
| 60 | 93 |
| 50 | 98 |
| 40 | 100 |
Explain why the scarcity problem causes people to consider opportunity costs and trade-offs among choices.
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