Econ Assignment

Ch.1

Questions for review

3. The marginal benefit of a glass of water is usually small because people can get plenty of water easily. But in some developing countries, people can hardly get clean water, the marginal benefit of a glass of water then maybe great.

5. Because every country can become winner by trading. Trade can make everyone better off. Trading allows each country specialize in doing particular thing. It helps increase efficiency and reduces costs of the production.

Problems and applications

2. we can measure the related benefit of a good psychological effect. First, after you have the vacation, you may feel relieved and recharged with energy. Then, it will increase your efficiency at work. According to your improved working performance, t can be measured in term of extra earning. Or get enough rest and be happier can keep you healthy, then you can save the fee of seeing doctor.

4. the 5% interest.

5. Yes, I should. If I don’t do that, I will lost 5M, if I do, I have to invest 1M more but then can get back 3M, therefore, I will only lose 3M (-5M-1M+3M), which is less than if I stop. And the most that I should pay is 3M (-5M-3M+3M).

7(a) The incentives for working become greater because it is the only way to keep their living standard.

(b) Some might think that it is the social responsibility and the so called “equality” to help those poor by supporting them with welfare. But at the same time, those poor get the welfare support and no longer need to work hard to support their lives, then the productivity of the society become inefficient. In order to increase the efficiency, we must produce some incentives to those poor to work. The incentive would be cutting the welfare so that they have no rely on the welfare and have to work. But cutting the welfare then will be considered as irresponsible and unfair to those poor. So in this case, if you want to achieve high efficiency, then you may have to scarify the equality.

8. It will take me less time if I do all the cleaning and my roommate do all the cooking. For example, the production of a iphone can be divided into different stages; the first stage is those programming and producing those small component like CPU, etc. this stage requires high technology skill and specialized professionals who can be found in the U.S. thus, this part can be done in the U.S. the another stage is about assemble all the components together, which require low skill but labour intensive, thus this part can be outsourced to China. Then the specialized professional in America do not need to waste time to assembly. They can focus on programming, etc. it will be more efficient.