Chapter 2: Q 14 (page 44)
What are diminishing marginal returns?
We add additional increments of resources to producing a good or service, the marginal benefit from those additional increments will decline.
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Why is a production possibilities frontier typically drawn as a curve, rather than a straight line?
Would an op-ed piece in a newspaper urging the adoption of a particular economic policy be a positive or
normative statement?
Draw Marie’s budget constraint with pies on the horizontal axis and magazines on the vertical axis. What is the slope of the budget constraint?
Use this information to answer the following 4 questions: Marie has a weekly budget of \(24, which she likes to spend on magazines and pies.
If the price of a pie is \)12, what is the maximum number of pies she could buy in a week?
Suppose Alphonso’s town raises the price of bus
tickets from \(0.50 to \)1 and the price of burgers rises from \(2 to \)4. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from \(10 to \)20. How is his budget constraint affected from all three changes? Explain.
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