Scarcity exists when: Krugman/Wells Microeconomics Se-Graded Homework-Chapter 1 a. individuals can have more of one good but only by giving up something else. b. resources are unlimited. c. making choices among two or more alternatives is not necessary. d. individuals can have more of any good without giving up anything. 2. When a chef prepares a dinner for a customer, which factor is physical capital? a. the chef b. the chef’s training and experience c. the food ingredients d. the oven 3. Margo spends
30,000 plus whatever she would have earned had she not been in college. b.
30,000 instead. d. whatever she would have earned had she not been in college. 4. You have
1 and a candy bar will also cost you
1 plus the enjoyment you would have received from the candy bar. c.
- 5. You are analyzing a trade-off when you compare the _ and _ of doing something. a. marginal benefits; total benefits b. direct costs; total costs c. costs; benefits d. direct costs; opportunity costs
The Correct Answer and Explanation is:
Correct Answers:
- a. individuals can have more of one good but only by giving up something else.
- d. the oven
- a. 30,000 plus whatever she would have earned had she not been in college.
- b. $1 plus the enjoyment you would have received from the candy bar.
- c. costs; benefits
Explanation (Approx. 300 words, without using the word “we”):
Scarcity refers to the basic economic problem that arises because resources are limited. Individuals face scarcity when choosing between different goods and services, as selecting more of one often means giving up some of another. This concept is illustrated when more of one item is obtained only by sacrificing something else, highlighting the opportunity cost involved in every decision.
When a chef prepares a meal, various inputs are used. Physical capital refers to man-made tools and equipment used in production. In this context, the oven qualifies as physical capital because it is a tangible tool used to produce goods. The chef represents labor, training is human capital, and ingredients are raw materials.
The cost of attending college extends beyond tuition. Opportunity cost includes the tuition fee and the income lost from not working during that time. For instance, if Margo pays $30,000 for college and gives up a job that would have earned her money, both the payment and the forgone income are considered part of the total cost.
In the decision to buy a candy bar for $1, the opportunity cost includes both the dollar spent and the enjoyment lost from not using that dollar on something else. This aligns with the idea that the true cost of an action includes all that must be given up.
Finally, analyzing a trade-off involves comparing the costs and benefits of an action. Decisions are influenced by weighing what must be sacrificed (costs) against what will be gained (benefits). This approach supports rational decision-making, ensuring that choices lead to the greatest possible benefit given the limitations.
