Macroeconomics: Principles, Problems, & Policies
20th Edition
ISBN: 9780077660772
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 1, Problem 6DQ
To determine
The slope of a budget line that illustrates opportunity cost , trade-offs, scarcity, and the effect of limited incomes.
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How does the slope of a budget line illustrate opportunity costs and trade-offs? How does a budget line illustrate scarcity and the effect of limited incomes?
Marie has a weekly budget of $24. Pie's are $12 each. Magazines are $4 each. What is Marie's opportunity cost of purchasing a pie?
Suppose you won $15 on a lotto ticket at the local 7-Eleven and decided to spend all the winnings on candy bars and bags of peanuts. Candy bars cost $0.75 each while bags of peanuts cost $1.50 each. a. Construct a table showing the alternative combinations of the two products that are available. b. Plot the data in your table as a budget line in a graph. What is the slope of the budget line? What is the opportunity cost of one more candy bar? Of one more bag of peanuts? Do these opportunity costs rise, fall, or remain constant as additional units are purchased? c. Does the budget line tell you which of the available combinations of candy bars and bags of peanuts to buy? d. Suppose that you had won $30 on your ticket, not $15. Show the $30 budget line in your diagram. Has the number of available combinations increased or decreased?
Chapter 1 Solutions
Macroeconomics: Principles, Problems, & Policies
Ch. 1.2 - Prob. 1QQCh. 1.2 - Prob. 2QQCh. 1.2 - Prob. 3QQCh. 1.2 - Prob. 4QQCh. 1.A - Briefly explain the use of graphs as a way to...Ch. 1.A - Prob. 2ADQCh. 1.A - Prob. 3ADQCh. 1.A - Prob. 1ARQCh. 1.A - Prob. 2ARQCh. 1.A - Prob. 2ARQ
Ch. 1.A - Prob. 1APCh. 1.A - Prob. 2APCh. 1.A - Prob. 3APCh. 1.A - Prob. 4APCh. 1.A - Prob. 5APCh. 1.A - Prob. 6APCh. 1.A - Prob. 7APCh. 1.A - Prob. 7APCh. 1.A - Prob. 8APCh. 1.A - Prob. 8APCh. 1 - Prob. 1DQCh. 1 - Prob. 2DQCh. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Prob. 5DQCh. 1 - Prob. 6DQCh. 1 - Prob. 7DQCh. 1 - Prob. 8DQCh. 1 - Prob. 9DQCh. 1 - Prob. 10DQCh. 1 - Prob. 11DQCh. 1 - Prob. 1RQCh. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 1PCh. 1 - Prob. 2PCh. 1 - Prob. 3PCh. 1 - Prob. 4PCh. 1 - Prob. 5PCh. 1 - Prob. 6PCh. 1 - Prob. 7PCh. 1 - Prob. 8P
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- Marie has a weekly budget of $24, which she likes to spend on magazines and pies. If the price of a magazine is $4 each, what is the maximum number of magazines she could buy in a week? If the price of a pie is $12, what is the maximum number of pies she could buy in a week? What is Marie’s opportunity cost of purchasing a pie? At the start of the week, Marie decides to buy a pie. Does this imply that the utility she receives from this pie is greater than or less than her opportunity cost of purchasing the pie? Marie is thinking about purchasing a second pie. Do we expect the marginal utility she receives from the second pie to be greater than, less than, or equal to the marginal utility she receives from the first pie? Explain your answer.arrow_forwardExplain the individual’s economizing problem and how trade-offs, opportunity costs, and attainable combinations can be illustrated with budget lines.arrow_forwardSuppose Alphonso’s town raises the price of bus tickets from $0.50 to $1 and the price of burgers rises from $2 to $4. Why is the opportunity cost of bus tickets unchanged? Suppose Alphonso’s weekly spending money increases from $10 to $20. How is his budget constraint affected from all three changes? Explainarrow_forward
- Attempts Average / 1 6. Scarcity, opportunity cost, and marginal analysis Darnell is training for a triathlon, a timed race that combines swimming, biking, and running. Consider the following sentence: Darnell has only 20 hours this week that he can devote to training. Each hour he spends swimming is an hour that he can't spend biking or running. Which basic principle of individual choice do the statements best illustrate? People face trade-offs. Darnell can use time most efficiently by spending the same amounts of time on swimming, biking, and running. People usually exploit opportunities to make themselves better off. Darnell has an incentive to spend more time on swimming than on biking or running. O O Oarrow_forwardIf a family spends its entire budget in a given time frame, the family can afford either 95 cans of vegetables or 40 frozen dinners. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of a can of vegetables in the time frame?arrow_forwardA student has a monthly budget of $120 to spend on either burrito, which cost $6 each, or sodas, which cost $4 each.. What is the opportunity cost of a soda?arrow_forward
- 8. An individual's budget Suppose Carlos has a yearly budget of $160 to spend on milk and cereal. Milk is priced at $4 per gallon, and cereal is priced at $2 per box. If Carlos spends his entire $160 on milk, he can buy CEREAL (Boxes) Use the blue line (circle symbol) to plot Carlos's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of milk and cereal that are affordable for Carlos. Finally, place the black point (plus symbol) on the point on Carlos's budget constraint that corresponds to a scenario in which Carlos spends $80 on each good. Note: Dashed drop lines will automatically extend to both axes. 120 110 100 90 80 70 60 50 40 30 20 10 0 0 10 20 30 gallons of milk. If he spends his entire $160 on cereal, he can buy 40 50 60 70 MILK (Gallons) 80 90 100 110 120 BC, ($160) Affordable Region $80 on Each boxes of cereal. BC₂ ($200)arrow_forwardSuppose Megan has a yearly budget of $240 to spend on juice and cereal. Juice is priced at $4 per gallon, and cereal is priced at $6 per box. If Megan spends her entire $240 on juice, she can buy 60 gallons of juice. If she spends her entire $240 on cereal, she can buy 40 boxes of cereal. Use the blue line (circle symbol) to plot Megan's budget constraint on the following graph. Next, use the orange point (square symbol) to shade the area that represents combinations of juice and cereal that are affordable for Megan. Finally, place the black point (plus symbol) on the point on Megan's budget constraint that corresponds to a scenario in which Megan spends $120 on each good. Note: Dashed drop lines will automatically extend to both axes. 120 110 100 Вс, ($240) 90 80 Affordable Region 70 60 50 $120 on Each 40 30 20 BC, ($360) 10 + 10 20 30 40 50 60 70 80 90 100 110 120 JUICE (Gallons) CEREAL (Boxes)arrow_forwardExplain the link between scarcity and each of the following a) choice b) opportunity cost c) competition.arrow_forward
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