Econ 131 - Spring 2006 HW #1 - Ch 1-3.
Required Homework - Ch 1-3
I know I mentioned I was going to have graphing review as optional questions on this home-
work, but it turns out that these questions are best suited as a supplement for Chapter 4,
so we’ll hold off on those until then. All questions on this problem set are required.
1. A recent author of classical literature once asserted that her ”love don’t cost a thing”.
In light of the principles we learned from chapter 1, discuss this statement. Come up with
1 or 2 different opportunity costs which could be associated with dating Ms. Lopez.
2. (Mankiw 2.4) You win $100 in a basketball pool. You have a choice between spending
the money now or putting it away for a year in a bank account that pays 5 percent interest.
What is the opportunity cost of the spending that $100 now?
3. (Mankiw 3.8) England and Scotland both produce scones and sweaters. Suppose that
an English worker can produce 50 scones an hour or 1 sweater per hour. Suppose a Scottish
worker can produce 40 scones per hour or 2 sweaters per hour.
a. What is the opportunity cost of producing 1 sweater in England?
b. What is the opportunity cost of producing 1 sweater in Scotland?
c. Who has the absolute advantage in the production of scones? of sweaters?
d. Who has the comparative advantage in the production of scones? of sweaters?
e. If England and Scotland decide to trade, which commodity will Scotland trade to
England? Hint: To gain from trade, people should specialize in what they’re ”good” at,
in our sense of the word ”good.”
4. (Mankiw 3.6). Consider a professor writing a book. The professor can both write the
chapters and gather the needed data faster than anyone else at the university. Still, he pays
a student to collect data at the library, is this sensible? Explain.
5. (Mankiw 3.2). Maria can read 20 pages of economics in an hour. She can also read
50 pages of sociology in an hour. She spends 5 hours per day studying.
a. Draw Maria’s production possibilities frontier for reading economics and sociology. Be
sure to label the axes.
1
