Homework #1 / Microeconom: instructor: Wesson Answer all of the followii on a se

Question

Homework #1 / Microeconom: instructor: Wesson Answer all of the followii on a separate sheet of paj (10%) What is the op production from 64 t which producer has the comparative advantage in wheat? Which producer has the comparative advantage in apples? aircraft carriers There are two people, one prefers point A, one prefers point B. Imagine some reasons for their different preferences. Are these reasons normative or are they positive? For the three statements below, classify them as either normative or positive and classify them as either microeconomics or macroeconomics. The maximum unemployment rate in the present recession was reached in 2010. Limitations on oil and gas drilling are un-American. Inflation is a more important problem than unemployment is.

Explanation / Answer

Your graph is very hard to read but opportunity cost is the cost of the next best alternative. The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. The difference in return between a chosen investment and one that is necessarily passed up. Say you invest in a stock and it returns a paltry 2% over the year. In placing your money in the stock, you gave up the opportunity of another investment - say, a risk-free government bond yielding 6%. In this situation, your opportunity costs are 4% (6% - 2%).

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