Chapter 2: Q. 2.22 (page 47)
Suppose that in Fig 2-2, the nation currently is producing combination D in the table and on the graph of the production possibilities curve. What is the opportunity cost of producing 20 million more tablet devices and moving to production combination F?
17.5 million
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Recently, a woman named Mary Krawiec attended an auction in Troy, New York. At the auction, a bank was seeking to sell a foreclosed property: a large Victorian house suffering from years of neglect in a neighborhood in which many properties had been on the market for years yet remained unsold. Her \(10 offer was the highest bid in the auction, and she handed over a \)10 bill for a title to ownership. Once she acquired the house, however, she became responsible for all taxes on the property and for an overdue water bill of \(2,000. In addition, to make the house habitable, she and her husband devoted months of time and unpaid labor to renovating the property. In the process, they incurred explicit expenses totaling \)65,000. Why do you suppose that the bank was willing to sell the house to Ms. Krawiec for only $10? (Hint: Contemplate the bank’s expected gain, net of all explicit and opportunity costs, if it had attempted to make the house habitable.)
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.
Evaluate why everyone, whether poor or affluent, faces the problem of scarcity.
Construct a production possibilities curve for a nation facing increasing opportunity costs for producing food and video games. Show how the PPC
changes have given the following events.
(a) A new and better fertilizer is invented.
(b) Immigration occurs, and immigrants’ labor can be employed in both the agricultural sector and the video game sector.
(c) A new programming language is invented that is less costly to code and is more memory-efficient, enabling the use of smaller game cartridges.
(d) A heat wave and drought result in a 10 percent decrease in usable farmland.
Could the U.S. Navy expand its production of both ships and weapons after switching from missiles to rail-gun weapons? Explain your reasoning.
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