Problems: Chapter 1 1. (a) Compute the opportunity cot in forgone tanks for each

Question

Problems: Chapter 1 1. (a) Compute the opportunity cot in forgone tanks for each aditional truck produced: in Truck output Tank output Opportunity cost5 45 38 30 20 (b) As truck output increases, opportunity remaining constant? 0 08 are opportunity costs (A) increasing, (B) decreasing, or (C) 2. What is an opportunity cost? How does the idea relate to the definition of economics? Which of the following decisions would entail the greater opportunity cost: Allocating a square block in the heart of New York City for a surface parking lot or allocating a square block at the edge of a typical suburb for such a lot? Explain. State (a) a positive economic statement of your choice, and then (b) a normative economic statement relating to your first statement. 3.

Explanation / Answer

Question 1) The opportunity cost is computed as the difference in Tank output for each successive truck addition

We see that the opportunity cost is increasing as more and more trucks are added. The reason is that the factors of production that are engaged in tan production are not equally efficient in truck manufacturing so its addional productivity goes on falling or opportunity cost goes on increasing

Question 2) It is cost of a lost opportunity, the cost that belongs to an activity which is rejected over some other prefered activity. In economics there are many alternatives that a particular resource can be used in and therefore if we select a given alternative, we reject the others. Opportunity cost measures the cost of this next best alternative.

Allocation made in New York has greater opportunity cost because there are many alternatives for that area in New York while the same size plot in a suburb has fewer uses.

Question 3) Normative statements are used in Economics to have discussions about the situations as what should be there in place of the current or future event. These include what should be done, such as 'the government should charge more taxes from riches than the poor'. Positive statements focus on what is, what will be or what it was like the unemployment rate is expected to fall in 2018.

Truck output 0 1 2 3 4 5 Tank output 5 4.5 3.8 3 2 0 OC 0.5 0.7 0.8 1 2

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.