- What is an opportunity cost? How does the idea relate to the definition of economics? Which
of the following decisions would entail the greater opportunity cost: Allocating a square block in
the heart of New York City for a surface parking lot or allocating a square block at the edge of a
typical suburb for such a lot? Explain. - What is meant by the term “utility” and how does the idea relate to purposeful behavior? LO1
- What are the key elements of the scientific method and how does this method relate to
economic principles and laws? - Indicate whether each of the following statements applies to microeconomics or
macroeconomics:
a. The unemployment rate in the United States was 9.7 percent in March 2010.
b. A U.S. software firm discharged 15 workers last month and transferred the work to India.
c. An unexpected freeze in central Florida reduced the citrus crop and caused the price of oranges
to rise.
d. U.S. output, adjusted for inflation, decreased by 2.4 percent in 2009.
e. Last week Wells Fargo Bank lowered its interest rate on business loans by one-half of 1
percentage point.
f. The consumer price index rose by 2.7 percent from December 2008 to December 2009. - What are economic resources? What categories do economists use to classify them? Why are
resources also called factors of production? Why are they called inputs? - Why is money not considered to be a capital resource in economics? Why is entrepreneurial
ability considered a category of economic resource, distinct from labor? What are the major
functions of the entrepreneur? - Explain how (if at all) each of the following events affects the location of a country’s
production possibilities curve:
a. The quality of education increases.
b. The number of unemployed workers increases.
c. A new technique improves the efficiency of extracting copper from ore.
d. A devastating earthquake destroys numerous production facilities.
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