110_11s_SelectedQ_Ch01

110_11s_SelectedQ_Ch - Econ 110 Selected Questions From Chapter 1 What is Economics 1 Apple Computer Inc decides to make iTunes freely available in

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1 Econ 110 Selected Questions From Chapter 1 - What is Economics? 1. Apple Computer Inc. decides to make iTunes freely available in unlimited quantities. a. How does Apple’s decision change the opportunity cost of a download? Apple’s decision decreases the opportunity cost of a tune by removing the previous monetary cost of 99¢ per tune b. Does Apple’s decision change the incentives that people face? Apple’s decision changes people’s incentives. For example, it increases people’s incentives to buy an iPod in order to take advantage of the newly “free” music available on iTunes. c. Is Apple’s decision an example of a microeconomic or a macroeconomic issue? Apple’s decision is a microeconomic decision because it affects a single company and a single market. 2. Which of the following pairs does not match: a. Labor and wages? Labor earns wages, so this pair matches. b. Land and rent? Land earns rent, so this pair matches. c. Entrepreneurship and profit? Entrepreneurship earns profit, so this pair matches. d. Capital and profit? Capital earns interest, so this pair does not match. 3. Explain how the following news headlines concern self-interest and the social interest: a. Wal-Mart Expands in Europe Wal-Mart’s expansion is a decision made by Wal-Mart to further Wal-Mart’s interest. Thus the decision is directly in Wal-Mart’s self interest. The question of whether this choice also furthers the social interest is one that is studied in microeconomics. b.
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This note was uploaded on 05/20/2011 for the course ECON 110 taught by Professor Po during the Spring '11 term at HKU.

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110_11s_SelectedQ_Ch - Econ 110 Selected Questions From Chapter 1 What is Economics 1 Apple Computer Inc decides to make iTunes freely available in

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