solutions01 - Chapter 1 WHAT IS ECONOMICS? Solutions to the...

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1 1 WHAT IS ECONOMICS? Solutions to the Odd-Numbered Problems 1. a. Tunes remain scarce because even with iTunes making tunes feely available, many people do not own iPods and so cannot enjoy music away from their computers. In addition, tunes remain scarce even for people with Ipods because they might want to listen to music at times they cannot, such as when they are in class listening to the instructor. b. 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. Apple’s decision is a microeconomic decision because it affects a single company and a single market. d. Apple’s decision decreases the opportunity cost of a tune by removing the previous monetary cost of 99¢ per tune. 3. a. Wal-Mart’s expansion is a decision made by Wal-Mart in order to further Wal-Mart’s interest. Thus the decision is directly in Wal-Mart’s self interest. The question of whether this sort of choice also furthers the social interest is one that is studied in microeconomics. b. Taco bell’s expansion is a decision made by Taco Bell in order to further Taco Bell’s interest. Thus the decision is directly in Taco bell’s self interest. The question of whether this sort of choice also furthers the social interest is one that is studied in microeconomics. c. McDonald’s decision to serve salads is a decision made by McDonald’s in order to further McDonald’s interest. Thus the decision is directly in McDonald’s self interest. The question of whether this sort of choice also furthers the social interest is one that is studied in microeconomics. d. The decision to require that food must be labeled with nutrition information is made in the social interest. This decision is not made by any one single firm and so does not (necessarily) reflect anyone’s self interest. 5.
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This note was uploaded on 09/14/2011 for the course ECON 103 taught by Professor Gispy during the Spring '11 term at Prairie State College .

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solutions01 - Chapter 1 WHAT IS ECONOMICS? Solutions to the...

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