answerkey1_forstudents - HW #1 :Answer Key REVISED...

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HW #1 :Answer Key REVISED Economics 304K:Principles of Microeconomics Prof. Meg Ledyard (25 Points total) These answers are just a guideline, and while I have tried to make sure that they are correct, there is still the possibility of small errors, so be careful, and ask if you think something is wrong. 1. (2 points) Classify each of the following statements is positive or normative. Explain why. a. An increase in taxes will cause people to work less hours. This is a positive statement because it tells what happens in the world (it is a fact) . b. The government should increase taxes, because people work too much. This is a normative statement because it tells what the government should do (a policy recommendation or opinion) 2. (1 point) Define opportunity cost. What is your opportunity cost of attending class? Opportunity cost is the value of the next best alternative or whatever must be given up to obtain some item. 3. (8 points) Suppose there are two goods in the world, hammers and nails. Paul can produce one hammer in 15 min, and one nail in 5. Art can produce one hammer in 40 min and one nail in 15. Suppose that there are 10 hrs for each of them to work on making
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This note was uploaded on 09/14/2009 for the course ECON 304K taught by Professor Ledyard during the Fall '08 term at University of Texas at Austin.

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answerkey1_forstudents - HW #1 :Answer Key REVISED...

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