Colander_7th_answers - Colanders Economics 7th Edition...

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Colander’s Economics, 7 th Edition Answers to End-of-Chapter Questions by David Colander A Note about the Answers The following answers are meant as guides to answering the end-of-chapter questions, not as definitive answers. The same questions often have many answers; this is especially true of policy-oriented questions. Although we have tried hard to see that mistakes are eliminated, the reality is that, as in any human endeavor, mistakes are inevitable. If you have checked and double-checked your answer and it is substantially different from that found here, assume that our answer is wrong, not yours. If you do come to a different answer, or think an answer misses an important aspect of the question, please check for corrections at my website to see if the answer has changed. If you don’t find it there, please e-mail me at [email protected] with your answer and an explanation of why you think it is better. I will get back to you and if I think you are right, I will post the change on the Web page marked “Corrections,” together with your name and a thank-you. Chapter 1: Economics and Economic Reasoning Questions for Thought and Review 1. The author focuses on coordination rather than on scarcity to emphasize that wants are changeable and partially society-determined, and to emphasize that the degree of scarcity changes as the quantity of goods, services and usable resources changes with technology and human action that underlie production. 2. The responses will be varied since this question asks individual students about choices they have made. In these responses students should be encouraged to consider all the costs and benefits, and to be clear about the concept of the marginal costs and marginal benefits; sunk costs should not be included in the decision-making process. 3. Regretting a decision doesn’t necessarily mean that we did not use the economic decision rule when making the decision. At the time the decision was made, we weighed the marginal costs and marginal benefits, undertaking the activity if the marginal benefits exceeded the marginal costs and not undertaking the activity if the marginal costs exceeded the marginal benefits. Many decisions are made without knowing the full marginal costs and marginal benefits. Sometimes these marginal costs and marginal benefits are revealed at a later date making us regret our initial decision. An example is going out to a restaurant. From recommendations, we assume that the marginal benefit is one thing. If that recommendation overstates our actual experience, we will have overestimated the marginal benefit of eating out. We may regret having spent the money to eat out. 4. The opportunity cost of buying a $20,000 car is the benefit we would have gained by using that $20,000 for the next-best alternative, which could be spending it on other goods and services, or saving it.
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5. Only the marginal costs and benefits of taking the job are relevant. That means the sunk cost of the bachelor’s degree is irrelevant. Therefore, the relevant costs
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Colander_7th_answers - Colanders Economics 7th Edition...

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