Ch. 1 homework questions
Instructions: create space and enter your answers in the Word document below, and then submit as an email attachment. (8 questions, 100 possible points).
- What was Adam Smith’s “invisible hand” idea? Research, and then describe in your own words from an economics standpoint.
- In the former Soviet Union (a communist or ‘Marxist’ country), the government set artificially low prices on many basic necessities such as potatoes. Example: “From now on, the price of potatoes shall not exceed 10 cents a pound.” As a result, a smaller quantity of potatoes was provided by farmers, and customers either could not obtain them or had to wait in long lines to buy the potatoes that were available. Question: Did the government’s price policy helped or harmed consumers in the long run? Think about this, there may be more than one way to answer the question.
- Compare the following options using a cost-benefit analysis. (Benefits – costs = value). Be sure to evaluate money costs AND opportunity costs.
“Now that I’m starting college I will need to go out and buy a used car. I figure I’ll need about $3,000 for a down payment. Option 1: My relatives have offered to lend me the $3,000 at 4% interest for the year. Option 2: I can use $3,000 from my own savings account, which earns 2% interest per year.”
- Chick-fil-A’s “Eat MorChikin” advertising campaign features three cows holding signs like the ones below. If consumers began eating more chicken and less beef, would the cattle population increase or decrease? Think carefully about this and explain from an economics standpoint.
- Evaluate this statement, using the ideas we’ve discussed in class: “People in business get ahead by exploiting their customers.”
- Does a 60-year-old tree farmer have an incentive to plant and care for Douglas fir trees that will not reach optimal cutting size for another 50 years? Think carefully about this – the answer may not be obvious.
- Two centuries ago, there were more buffalo than cattle in the United States. Even though millions of cattle are butchered for beef consumption each year, the cattle population continues to grow while the buffalo are virtually extinct. Explain this from an economics perspective.
- During the last three decades, entrepreneurs like Steve Jobs (Apple), Sam Walton (Wal-Mart), and Jeff Bezos (Amazon.com) have earned billions of dollars. Do you think the average American is better or worse off as the result of the economic activities of these individuals? Explain your response.