Micro Economics

Hints for Unit 1 Assignment

For question 1.a. give the textbook’s definition of “Opportunity Costs”

For question 1.b. explain what you think are the opportunity costs in this situation For question 1.c. complete a chart of all the options, or list all of the options, then

discuss the criteria by which such a decision would be made.

For part a. of questions 2 and 3, choose the correct principle and explain why you think

it is correct.

For part b. of questions 2 and 3, list what you think would be the logical steps that would

fit the situation.

Econ’s Top Twelve

1. People must make choices because resources are scarce

2. The opportunity cost of an item-what you must give up in order to get it- is its true

cost

3. “How much” decisions require making trade-offs at the margin: comparing the

costs and benefits of doing a little bit more of an activity versus doing a little bit

less

4. People usually respond to incentives, exploiting opportunities to make

themselves better off

5. There are gains from trade

6. Because people respond to incentives, markets move toward equilibrium

7. Resources should be used as efficiently as possible to achieve society’s goals

8. Because people usually exploit gains from trade, markets usually lead to

efficiency

9. When markets do not achieve efficiency, government intervention can improve

society’s welfare

10. One person’s spending is another person’s income

11. Overall spending sometimes gets out of line with the economy’s productive

capacity

12. Government policies can change spending

Krugman, P., & W ells, R. (2018). First principles. Microeconomics (5th ed., pp. 6-19).

W orth Publishing.