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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. You are trying to decide whether to take a vacation. Most of the costs of the vacation (airfare, hotel, and forgone wages) are measured in dollars, but the benefits of the vacation are psychological. How can you compare the benefits to the costs? 2. Your roommate is a better cook than you are, but you can clean more quickly than your roommate can. If your roommate did all the cooking and you did all the cleaning, would your chores take you more or less time than if you divided each task evenly? Give a similar example of how specialization and trade can make two countries both better off. 3. Suppose a nation has a total of 12 units of labor, which can be used to produce either guns or butter. One gun takes 6 units of labor to produce and 1 butter takes 2 units of labor to produce.  Explain why scarcity exists in this economy. Use the data as evidence of your reasoning.  What is the maximum quantity of guns that can be produced?  What is the maximum quantity of butter than can be produced?  Draw the nation’s production possibility curve.  What is the opportunity cost of guns in this nation?  Explain why the nation can’t produce both 3 guns and 4 butters.  Explain why the nation shouldn’t produce both 1 gun and 2 butters.

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