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Chapter 2: Q 2.4 (page 27)
Explain why the economy faces a trade-off between consumption goods and capital goods.
Because the opportunity cost of making a consumer good will lead to a loss in the making of capital goods and viceversa.
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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.
Senator Borman interjects the following comment after the statements by Senators Creighton and Long reported in Problems 2-10 and 2-11: 鈥淚n fact, both of my esteemed colleagues are wrong, because an unacceptably large portion of our nation鈥檚 resources is currently unemployed.鈥� Of the labeled points on the diagram, which one is consistent with Senator Borman鈥檚 position?
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."
Like physical capital, human capital produced in the present can be applied to the production of future goods and services. Consider the table in Problem 2-13, and suppose that the nation鈥檚 residents are trying to choose between combination C and combination F. Other things being equal, will the future production possibilities curve for this nation be located farther outward if the nation chooses combination F instead of combination C? Explain.
You can wash, fold, and iron a basket of laundry in two hours and prepare a meal in one hour. Your roommate can wash, fold, and iron a basket of laun-
dry in three hours and prepare a meal in one hour. Who has the absolute advantage in laundry, and who has an absolute advantage in meal preparation? Who has the comparative advantage in laundry, and who has a comparative advantage in meal preparation?
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