How would a local government use marginal analysis to determine whether or not to undertake a new highway construction project?
What will be an ideal response?
The decision whether or not to pursue a new highway construction project requires a comparison of the MC and MB of the project. The primary costs of the project would be the expenditures on labor, capital and raw materials required to build the highway. One of the major benefits of the project would be the time savings that result from reduced traffic congestion. This benefit to commuters would be measured to a large extent by the opportunity cost of the time they spend commuting. People typically allocate their time between work and leisure activities. According to the No Marginal Improvement Principle, the value of an extra hour of leisure must equal the value of an extra hour spent working. Therefore, the opportunity cost of the foregone leisure that results from commuting can be measured by the commuter's hourly wage rate.
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The curvature of an economy's production possibilities curve represents:
A) an increasing marginal cost of producing both goods. B) an increasing opportunity cost of producing each good. C) diminishing marginal returns to inputs. D) increasing terms of trade between both goods.
What is the inflation gap? What is the output gap?
What will be an ideal response?
When making decisions, economists believe that individuals act rationally if they: a. seek to improve their own situations and not try to anticipate future consequences of their actions
b. only pursue the goals of the community. c. people do the best they can, based on their values and information, under current and future circumstances. d. always choose alternatives that offer the greatest financial reward.
Which of the following measures of globalization was not affected during the aftermath of the terrorist attacks in the United States on September 11, 2001?
a. World trade b. Global foreign direct investment c. International travel and tourism d. International telephone calls e. Political engagement