1. What is the opportunity cost of producing a capital good such a new road?
2. In economic terminology, what is the meaning of investment?
3. How does an individual know whether or not an investment in education is worthwhile?
4. Define opportunity cost. Given the definition of opportunity cost, explain what is meant by the statement "There is not such thing as a free lunch."
5. Kathy and Amy paint pictures and do caricatures to sell to tourists. In one day, Kathy can either paint two pictures or do four caricatures. In one day, Amy can either paint three pictures or do three caricatures. For both Kathy and Amy, what is the opportunity cost of painting one picture? Who has the comparative advantage in painting pictures and who has the comparative advantage in doing caricatures? How might they be able to increase their total output?
6. Use a graph and comment on the following statement: "If an economy is producing inside its production possibilities frontier, it could possibly produce more of one good without giving up any of the other."