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1.Describesomeofthetrade-offsfacedbyeachofthefollowing:a.afamilydecidingwhethertobuyanewcarb.amemberofCongressdecidinghowmuchtospendonnationalparksc.acompanypresidentdecidingwhethertoopenanewfactoryd.aprofessordecidinghowmuchtoprepareforclasse.arecentcollegegraduatedecidingwhethertogotograduateschool2.Youaretryingtodecidewhethertotakeavacation.Mostofthecostsofthevacation(airfare,hotel,andforgonewages)aremeasuredindollars,butthebenefitsofthevacationarepsychological.Howcanyoucomparethebenefitstothecosts?3.YouwereplanningtospendSaturdayworkingatyourpart-timejob,butafriendasksyoutogoskiing.Whatisthetruecostofgoingskiing?Nowsupposeyouhadbeenplanningtospendthedaystudyingatthelibrary.Whatisthecostofgoingskiinginthiscase?Explain.4.Youwin$100inabasketballpool.Youhaveachoicebetweenspendingthemoneynoworputtingitawayforayearinabankaccountthatpays5percentinterest.Whatistheopportunitycostofspendingthe$100now?5.Thecompanythatyoumanagehasinvested$5millionindevelopinganewproduct,butthedevelopmentisnotquitefinished.Atarecentmeeting,yoursalespeoplereportthattheintroductionofcompetingproductshasreducedtheexpectedsalesofyournewproductto$3million.Ifitwouldcost$1milliontofinishdevelopmentandmaketheproduct,shouldyougoaheadanddoso?Whatisthemostthatyoushouldpaytocompletedevelopment?6.TheSocialSecuritysystemprovidesincomeforpeopleoverage65.IfarecipientofSocialSecuritydecidestoworkandearnsomeincome,theamountheorshereceivesinSocialSecuritybenefitsistypicallyreduced.a.HowdoestheprovisionofSocialSecurityaffectpeople’sincentivetosavewhileworking?b.Howdoesthereductioninbenefitsassociatedwithhigherearningsaffectpeople’sincentivetoworkpastage65?7.A1996billreformingthefederalgovernment’santipovertyprogramslimitedmanywelfarerecipientstoonlytwoyearsofbenefits.a.Howdoesthischangeaffecttheincentivesforworking?b.Howmightthischangerepresentatrade-offbetweenequalityandefficiency?8.Yourroommateisabettercookthanyouare,butyoucancleanmorequicklythanyourroommatecan.Ifyourroommatedidallthecookingandyoudidallthecleaning,wouldyourchorestakeyoumoreorlesstimethanifyoudividedeachtaskevenly?Giveasimilarexampleofhowspecializationandtradecanmaketwocountriesbothbetteroff.9.Explainwhethereachofthefollowinggovernmentactivitiesismotivatedbyaconcernaboutequalityoraconcernaboutefficiency.Inthecaseofefficiency,discussthetypeofmarketfailureinvolved.a.regulatingcableTVpricesb.providingsomepoorpeoplewithvouchersthatcanbeusedtobuyfoodc.prohibitingsmokinginpublicplacesd.breakingupStandardOil(whichonceowned90percentofalloilrefineries)intoseveralsmallercompaniese.imposinghigherpersonalincometaxratesonpeoplewithhigherincomesf.institutinglawsagainstdrivingwhileintoxicated10.Discusseachofthefollowingstatementsfromthestandpointsofequalityandefficiency.a.“Everyoneinsocietyshouldbeguaranteedthebesthealthcarepossible.”b.“Whenworkersarelaidoff,theyshouldbeabletocollectunemploymentbenefitsuntiltheyfindanewjob.”11.Inwhatwaysisyourstandardoflivingdifferentfromthatofyourparentsorgrandparentswhentheywereyourage?Whyhavethesechangesoccurred?12.SupposeAmericansdecidetosavemoreoftheirincomes.Ifbankslendthisextrasavingtobusinesses,whichusethefundstobuildnewfactories,howmightthisleadtofastergrowthinproductivity?Whodoyousupposebenefitsfromthehigherproductivity?Issocietygettingafreelunch?13.In2010,PresidentBarackObamaandCongressenactedahealthcarereformbillintheUnitedStates.TwogoalsofthebillweretoprovidemoreAmericanswithhealthinsurance(viasubsidiesforlower-incomehouseholdsfinancedbytaxesonhigher-incomehouseholds)andtoreducethecostofhealthcare(viavariousreformsinhowhealthcareisprovided).a.Howdothesegoalsrelatetoequalityandefficiency?b.HowmighthealthcarereformincreaseproductivityintheUnitedStates?c.HowmighthealthcarereformdecreaseproductivityintheUnitedStates?14.DuringtheRevolutionaryWar,theAmericancoloniescouldnotraiseenoughtaxrevenuetofullyfundthewareffort;tomakeupthisdifference,thecoloniesdecidedtoprintmoremoney.Printingmoneytocoverexpendituresissometimesreferredtoasan“inflationtax.”Whodoyouthinkisbeing“taxed”whenmoremoneyisprinted?Why?15.Imaginethatyouareapolicymakertryingtodecidewhethertoreducetherateofinflation.Tomakeanintelligentdecision,whatwouldyouneedtoknowaboutinflation,unemployment,andthetrade-offbetweenthem?16.Apolicymakerisdecidinghowtofinancetheconstructionofanewairport.Hecaneitherpayforitbyincreasingcitizens’taxesorbyprintingmoremoney.Whataresomeoftheshort-runandlong-runconsequencesofeachoption?1.Drawacircular-flowdiagram.Identifythepartsofthemodelthatcorrespondtotheflowofgoodsandservicesandtheflowofdollarsforeachofthefollowingactivities.a.Selenapaysastorekeeper$1foraquartofmilk.b.Stuartearns$4.50perhourworkingatafastfoodrestaurant.c.Shannaspends$30togetahaircut.d.Sallyearns$10,000fromher10percentownershipofAcmeIndustrial.2.Imagineasocietythatproducesmilitarygoodsandconsumergoods,whichwe’llcall“guns”and“butter.”a.Drawaproductionpossibilitiesfrontierforgunsandbutter.Usingtheconceptofopportunitycost,explainwhyitmostlikelyhasabowed-outshape.b.Showapointthatisimpossiblefortheeconomytoachi