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Econ problem set 1 Q5

Econ problem set 1 Q5 - Econ problem set#1 Question 5 a In...

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Econ problem set #1 Question 5 a. In the Frank and Bernanke textbook, opportunity cost is defined to be the cost of an activity that that is the next best alternative that must be forgone to undertake the activity. Trade-offs are defined in Winter's book to be the costs and benefits of whatever issue is at hand. When analyzed, opportunity cost and trade-offs are different because trade-offs encompass costs and benefits, whereas opportunity cost, by definition, just analyzes the cost of the next best alternative, not the benefits. b. Markets will always have a limit to the total number of goods that can be produced in a given society. There are trade-offs for everything that is produced, and the one of the main goals of the economist is to find the proper balance of a variety of goods that can be produced to satisfy society as best possible overall. Keeping this in mind, markets can't be expected to provide the desirable number, size, and location of roads in one's home/community because doing so would
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