Assignment: Basic Economic Principles

In this Assignment, you will evaluate economic problems and opportunity costs to make informed economic decisions to effectively use scarce resources. You will also examine factors that affect production possibilities to determine the maximum possible output, given the resources and the current technology.

Instructions: Answer all of the following questions. You are required to follow proper APA format. Read the Criteria section below for more information before you begin this Assignment.

In this Assignment, you will be assessed on the following outcome:

MT445-1: Evaluate opportunity costs in the business decision-making process.

 

  1. Analyze whether each of the following is primarily a microeconomic or a macroeconomic issue:

 

  1. Setting the price for a cup of coffee.

 

 

  1. Measuring the impact of tax policies on total household spending in the economy.

 

 

  • A household’s decision regarding whether or not to go on vacation.

 

 

  1. A worker’s decision regarding which job to accept.

 

 

  1. Designing government policies to address issues with the social security program.

 

 

  1. Explain why each of the following is either a positive or normative economic statement.
  2. A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10 percent.

 

  1. The federal government should spend more on diabetes research.

 

  • Rising paper prices will increase book prices.

 

  1. The price of bagels at Bruegger’s is too high.

 

 

  1. Identify the effect of each of the following on the United States Production Possibilities Frontier (PPF). Does it shift inward, outward, or not at all? Briefly explain your answers.

 

  1. A decrease in the average length of annual vacations.

 

 

 

  1. An increase in immigration of foreign workers to the U.S.

 

 

 

  • An increase in the average retirement age.

 

 

 

  1. The migration of skilled USA workers to Europe.

 

 

 

  1. Identify whether each of the following would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home). Briefly explain your answers.

 

  1. Higher unemployment rates.

 

 

  1. Lower average wages.

 

 

  1. Higher demand for labor.

 

 

 

  1. Lower income tax rates on wages earned.

 

 

 

 

Economics

 

  1. Analyze whether each of the following is primarily a microeconomic or a macroeconomic issue.
  • Setting up the price for a cup of coffee

(Microeconomic issue).

  • Measuring the impact of tax policies on total household spending in the economy.

(Macroeconomic issue).

  • A household’s decision regarding whether or not to go on vacation.

(Microeconomic issue).

  • A worker’s decision regarding which job to accept.

(Microeconomic problem).

  • Designing government policies to address issues with the social security program.

(Macroeconomic issue).

  1. Explain why each of the following is either a positive or normative economic statement.
  2. A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10 percent.

This is a positive economic statement since it explains phenomena and the casual relationships involved (Caplin & Schotter, 2008).

  1. The federal government should spend more on diabetes research.

This is a normative economic statement since it reflects on values and beliefs. Normative economics focuses on the goals of public policy, just like in the above statement (Caplin & Schotter, 2008).

  • Rising paper prices will increase book prices.

This is a positive economic statement since it reflects on facts and causal relations between book prices and paper prices.

  1. The price of bagels at Bruegger’s is too high.

This is a normative economic statement since it reflects on values and personal judgments.

  1. Identify the effect of each of the following on the United States Production Possibility Frontier (PPF). Does it shift inward, outward, or not at all? Briefly explain your answers.
  2. A decrease in the average length of annual vacations.

A decrease in the average length of annual vacations would shift the PPF curve outward. This is because decreasing the average length of annual vacations would avail more time and labor in production, thus leading to higher output (Mankiw, 2014).

  1. An increase in immigration foreign workers to the U.S.

This would shift the PPF curve outward. An increase in immigration increases the labor force available for production activities.

  • An increase in the average retirement age.

This may shift the curve outwards since more labor force is available for production activities.

  1. The migration of skilled USA workers to Europe.

This would shift the PPF curve inwards. Migration of skilled USA workers may cause a deficiency of skilled labor in the U.S. and thus lower production.

  1. Identify whether each of the following would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home). Briefly explain your answers.
  2. Higher unemployment rates.

Higher unemployment rates would decrease opportunity costs. This is because as unemployment increases, more people end up working in homes, hence increasing the demand for such jobs.

  1. Lower average wages

Lower average wages would decrease the opportunity costs for stay-at-home moms and dads. This is because of the low cost of the opportunity foregone to work outside. As such, most individuals may opt to work at home than outside.

  1. Higher demand for labor.

Higher demand for labor increases the opportunity costs. This is because other alternatives such as outside employment are also favorable. One would have to forego a higher opportunity cost by working at home.

  1. Lower income tax rates on wages earned

This would increase the opportunity costs. This is because if the individuals decide to work outside home, they would save more income.

References

Caplin, A., & Schotter, A. (2008). The foundations of positive and normative economics: A          handbook. Oxford: Oxford University Press.

Mankiw, N. G. (2014). Principles of economics. Stamford, CT: Cengage Learning.

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