Economics and Society Homework #1

Due Friday 1/22/16

1. Define the following:

a. Economics

b. Scarcity

c. Opportunity Cost

2. Consider the concept of scarcity. As individuals, what 2 basic limitations do we all have?

3. Emily works as a customer service representative, earning $12 an hour. One afternoon she decides to take off work and take her younger sister to the zoo. Their admission fee is $30, and they spend another $15 on rides. Lunch at the Wild Planet Café is $20. Emily then spends $10 on some Dippin’ Dots for dessert. After 4 hours in the zoo, they head home.

· What was the explicit cost of Emily’s trip to the zoo? (If no explicit cost, then write $0.)

· What was the implicit cost of her trip? (If no implicit cost, then write $0.)

· What was Emily’s opportunity cost of her afternoon at the zoo?

4. Emily works as a customer service representative. One afternoon she decides to take her younger sister to the zoo. Her other options for that afternoon, ranked in order of most preferred to least preferred, are: 1) paint a new canvas; 2) sunbathe/swim; 3) read a novel; 4) organize her closet

· What is Emily’s opportunity cost of her afternoon at the zoo?

5. Suppose you have 2 options – receiving (A) $100,000 in three years or (B) $150,000 in five years. Find the present value of each using the formula we discussed in class. Assume an interest rate of 5%.

· Present value of Option A =

· Present value of Option B =

· Which option should you choose?

6. What is the difference between microeconomics and macroeconomics?

7. Determine if the following are more likely to be microeconomic or macroeconomic issues:

· The relationship between two competing firms’ pricing behavior.

· The impact of a tax increase on aggregate output.

· A farmer’s decision to plant wheat or peanuts.

· The effect of government tax policy on long-term economic growth.

8. List the three types of factors of production (resources) discussed in class. Give an example of each.