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Chapter 2: Q 3 (page 45)

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.

Short Answer

Expert verified

The opportunity cost for you is downloading movies and the opportunity cost for your friend is a meal at a restaurant.

Step by step solution

01

Step 1. Opportunity cost.

Opportunity cost is the cost foregone for the alternative choices to satisfy wants.

02

Step 2. The opportunity cost for each person.

The opportunity cost for you is downloading movies and the opportunity cost for your friend is a meal at a restaurant because these are the opportunities that they will miss for purchasing the concert ticket.

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Most popular questions from this chapter

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?

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.

In response to Senator Creighton鈥檚 statement reported in Problem 2-10, Senator Long replies, 鈥淲e must remain at our current production combination if we want to be able to produce more consumption goods in the future.鈥� Of the labeled points on the diagram, which one could depict the future production combination Senator Long has in mind?

Country A and country B produce the same consumption goods and capital goods and currently have identical production possibilities curves. They also have the same resources at present, and they have access to the same technology.

a. At present, does either country have a comparative advantage in producing capital goods? Consumption goods?

b. Currently, country A has chosen to produce more consumption goods, compared with country B. Other things being equal, which country will experience the larger outward shift of its PPC during the next year?

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 CombinationUnits of Consumer GoodsUnits of Human Capital
A0100
B1097
C2090
D3075
E4055
F5030
G600

(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?
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