Assignment:
1.Keeping in mind the concept of opportunity cost, think of a decision you have made recently. What was the opportunity cost of your decision?
Introduces the Production Possibilities Model trying to point out that in any decision made within a society there are tradeoffs and hence opportunity costs. It states that when a society is at ANY POINT on the frontier, it is using its resources efficiently. However, to determine which of those many points on the frontier is BEST for the society, we need to consider the tastes and preferences of the society so we can determine at which point the marginal costs of producing the last unit of a good is equal to the marginal benefits the society receives from that last unit of the good. After reading the chapter, consider the following statement and submit your answers to the two questions.
Statement: Just before leaving office in 2001, President Clinton designated as parkland millions of acres of land owned by the federal government.
Questions:
1. Since the government already owned the land, is there an opportunity cost to the president's decision?
2. Why might some people have a problem with the president's decision, and how might those problems point out that identifying a nations tastes and preferences can be difficult, subjective, and problematic?
Pricey Beef is Set to Test Appetites
TOPICS: Supply and Demand
SUMMARY: Cattle prices have jumped to a record high (and probably will go higher), setting up a fresh hit of sticker shock for consumers at the grocer's meat counter. Read the article, and answer the following questions.
QUESTIONS:
1. What is the effect of a drought on the price of beef? In answering the question, identify the effect of a drought on the price of feed and subsequently on the supply of beef.
2. Is chicken an economic substitute of beef? What is the effect of an increase in the price of beef on the demand for chicken?
3. Explain the effect of a big U.S. corn crop in 2013 on the 2014 price of beef?