Economics Assignment: Opportunity Costs & Decision-Making

Microeconomics vs Macroeconomics

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

Evaluate opportunity costs in the business decision-making process.

1. Analyze whether each of the following is primarily a microeconomic or macroeconomic issue.  Briefly explain your answers.

i.Setting the price for a cup of coffee.

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

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

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

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

2. Explain why each of the following is either a positive or normative economic statement.

i.A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10%.

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

iii.Rising paper prices will increase book prices.

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

3.  Explain 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.

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

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

iii.An increase in the average retirement age.

iv.The migration of skilled U.S. workers to Europe.

4.  Answer the following in a 450–500 word essay.

An opportunity cost is the value of the best alternative we forgo to make a decision. The decisions we make typically involve constraints such as time, money, and other resources. “There is no free lunch” in our decision-making; we always encounter opportunity costs. If we decide to do something, it often means that we lose the chance to do something else. Therefore, we need to critically evaluate our decision-making to minimize our opportunity costs based on the viable alternative choices available to us at a given period.

Given the above information as the background, assume parents are evaluating the opportunity costs of stay-at-home moms or dads under different scenarios. You should thoroughly explain whether parent’s decision under each of the following scenarios would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home).

a. There is high unemployment rate in the economy. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?

b. There is low average wage rate in the economy. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?

c. There is improvement in the economic conditions that led to high demand for labor. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?

d.  Suppose the government lowered income tax rates on wages earned. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?