Chapter 2: Q 2.5 (page 27)
Distinguish between absolute and comparative advantage.
Comparative Advantage refers to lower opportunity cost whereas Absolute Advantage refers to the production of more units of goods with the given labor and input prices.
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Explain why the economy faces a trade-off between consumption goods and capital goods.
Based on the information provided in Problems 2-6, what is the opportunity cost to this student of allocating enough additional study time on economics to move her grade up from a 90 to a 100?
Suppose that in Fig 2-1, a student currently is allocating her study time in such a way that she is earning a C in mathematics and a C in economics. What is the opportunity cost, measured in terms of the resulting grade change, if this student wishes to reallocate her study time in order to raise her mathematics grade by one letter, from a C to a B?
Why might a person pay a firm at a mall to prepare her tax forms while she shops instead of allocating the same amount of time to finding a qualifying Free-File tax-preparation service?
Senator Borman interjects the following comment after the statements by Senators Creighton and Long reported in Problems 2-10 and 2-11: “In fact, both of my esteemed colleagues are wrong, because an unacceptably large portion of our nation’s resources is currently unemployed.” Of the labeled points on the diagram, which one is consistent with Senator Borman’s position?
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