Essentials Of Economics, Loose-leaf Version
8th Edition
ISBN: 9781337096898
Author: N. Gregory Mankiw
Publisher: South-Western College Pub
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Chapter 2, Problem 3PA
To determine
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The first principle of economics is that people face trade-offs. Use a production possibilities frontier to illustrate society’s trade-off between two “goods”—a clean environment and the quantity of industrial output. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop a new way of producing electricity that emits fewer pollutants.
he first principle of economics discussed in Chapter 1 is that people face trade-offs. Use a production possibilities frontier to illustrate society’s trade-off between two “goods”—a clean environment and the quantity of industrial output. What do you suppose determines the shape and position of the frontier? Show what happens to the frontier if engineers develop a new way of producing electricity that emits fewer pollutants.
Please read the following applications and then apply Microeconomics Principles to explain each topic.
If you can please also, add charts and graphs to broaden the explanation as well as add articles and
references. Please list all references and citations if you use any.
Application 1: Scarcity/Incentives
Incentives to Buy Hybrid Vehicles
As stated in the text, "rational people respond to incentives." I find this to be a very true statement. When
the tradeoff or benefit from something else changes, people tend to change their behavior to get that
certain benefit. The Number of hybrid cars that has been increased from 10,000 cars in 2000 to more than
340,000 in 2007, can be explained by this application. Increase in gas prices along with federal subsidy
encouraged people to buy more hybrid cars by reducing cost of driving and cost of hybrid cars. As, Subsidy
was the main reason behind 1/5 the sale of 2007, which is estimated so far. Incentives refer to something
that induces a person…
Chapter 2 Solutions
Essentials Of Economics, Loose-leaf Version
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- a) Trade-offs are important part of economic decision making. You are supposed to Analyze and explain any three trade-offs that you face in your life. b) You plan to study on weekend and your friends ask you to go to a farm house with them. What do you think is the true cost of spending your weekend on a farmhouse with friends? c) You plan to spend your weekend working at your father’s superstore for a wage, but your friends ask you go play cricket at the weekend. What do you think is the true cost of spending your weekend playing cricket with friends?arrow_forwardTim Geithner, a former U. S. Treasury Secretary, has said, "The recession that began in late 2007 was extraordinary severe. But the actions we took at its height to stimulate the economy helped arrest the free fall, preventing an even deeper collapse and putting the economy on the road to recovery." Which two of the three principles of economy-wide interaction are at work in this statement?arrow_forward
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