Chapter 1: Q 1.3 (page 1)
Evaluate the role that rational self-interest plays in economic analysis.
Rational self-interest leads people to achieve their respective goals which ultimately leads to efficient outcomes for the nation.
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Some people claim that the “economic way of thinking” does not apply to issues such as health care. Explain how economics does apply to this issue by developing a “model” of an individual’s choices.
Write a sentence contrasting positive and normative economic analysis.
In a single sentence, contrast microeconomics and macroeconomics. Next, categorize each of the following issues as either a microeconomic issue, a macroeconomic issue, or not an economic issue.
(a) The national unemployment rate.
(b) The decision of a worker to work overtime or not.
(c) A family’s choice to have a baby.
(d) The rate of growth of the money supply.
(e) The national government’s budget deficit.
(f) A student’s allocation of study time across two subjects.
Define economics. Explain briefly how the economic way of thinking—in terms of rational, self-interested people responding to incentives—relates to each of the following situations.
(a) A student deciding whether to purchase a textbook for a particular class.
(b) Government officials seeking more funding for mass transit through higher taxes.
(c) A municipality taxing hotel guests to obtain funding for a new sports stadium.
What would be the appropriate change in the U.S. degree of plastic-waste cleanliness if the marginal cost of pollution abatement is higher than the associated marginal benefit?
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