1. Economics studies choices that arise from one fact. What is that fact?
* Aside from the fact that there is scarcity, human wants/needs are insatiable.
2. Provide three examples of wants in the country today that are specially pressing but not satisfied.
a. Quality Education
b. Proper Health Care Benefit
c. Clean Drinking Water
3. Provide two examples of the post hoc fallacy.
a. Bill purchases a new PowerMac and it works fine for months. He then buys and installs a new piece of software. The next time he starts up his Mac, it freezes. Bill concludes that the software must be the cause of the freeze.
b. Joan is scratched by a cat while visiting her friend. Two days later she comes down with a fever. Joan concludes that the cat's scratch must be the cause of her illness.
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b. A good education is the right of every child. - WHAT
c. What will the government do with its budget surplus? â€“ FOR WHOM
6 Classify each of the following statements as positive or normative:
a. There is too much poverty in the United States. NORMATIVE
b. An increase in the gas tax will cut pollution. NORMATIVE
c. Cuts to social security in the United States have been too deep. NORMATIVE
7, Classify each of the following statements as positive or normative:
a. More scholarships to students from poor families will reduce U.S. poverty- POSITIVE
b. Free trade will harm developing countries. - NORMATIVE
c. Cuts to public education in the United States have been too high. - NORMATIVE
8. Kate usually plays tennis for two hours a week, and her grade on each math test is usually 70 percent. Last week, after playing two hours of tennis, Kate thought long and hard about playing for another hour. She decided to play another hour of tennis and cut her study time by one additional hour. But the grade on last weekâ€™s math test was 60 percent.
a. What was Kateâ€™s opportunity cost of the third hour of tennis?
Opportunity cost = 10 percent increase in her grade because of that extra hour that should have been allotted for her studies.
b. Given that Kate made the decision to play the third hour of tennis, what can you conclude about the comparison of her marginal benefit and marginal cost of the second hour of tennis?
The marginal benefit of that additional hour must have exceeded the marginal cost of giving it up for studies and allocated for play time instead.
c. Was Kateâ€™s decision to play the third hour of tennis rational?
It will only be rational if the marginal benefit is greater than the marginal cost.
d. Did Kate make her decision on the margin?
I think she did because she gave consideration to the cost and benefit of that additional hour.