ANSWERS AND SOLUTIONS
PROBLEM SET
1. a. This is a statement of how the economy works, and does not involve value
b. The appearance of the word “should” signals that this is a normative statement. It
c. This is a normative statement. If this statement were to rank different poverty
reduction strategies based on some objective criteria, it would be a positive
d. The second sentence in the statement is clearly positive; it deals with what is, or,
more accurately, what was. But whether increasing income inequality is inherently
2. a. Yes; capital
b. Yes; capital
c. Yes; labor
3. a. Critical assumption. Finding the fastest route depends upon being able to avoid as
b. Simplifying assumption. No city is completely flat, but minor hills and valleys
1
2 Instructor’s Manual for Economics: Principles and Applications, 6e
c. Critical assumption. If you cannot easily transfer from one highway to another,
d. Critical assumption. Other things equal, the shorter the route, the faster the travel
4. The opportunity cost of playing the computer game all weekend is the sacrifice of the
5. a. The average opportunity cost = explicit costs + implicit costs = [($27,293 (tuition
b. The average opportunity cost = explicit costs + implicit costs = $1,181 (books and
Note that we get $9,000 by assuming that the student can still work full time over
6. a. The average opportunity cost of attending a year of college at a 2-year public
b. The average opportunity cost of attending a year of college at a 2-year public
c. The average opportunity cost of attending a year of college at a 2-year public
Note that we get $9,000 by assuming that the student can still work full time over