Microeconomics Chapter 1 Questions

Jessica Chuang

Professor Wang

Principles of Microeconomics

Problem Set #1

A. I liked the opening story “Common Ground” of chapter one on page five since it gave me a real life scenario of how economics can affect an individual’s life since many of the common principles of economics can apply to many different issues. For me, I have a difficult time learning things if I can’t find a way for me to apply it to my life or apply it to a friend so having an introduction where it describes concepts that we’re going to learn in economics was helpful.

B. A penny was useful in the past because a penny used to have a high purchasing power. Back then; the minimum wage was around $2 an hour and was worth about 18 seconds of work. But due to inflation, a penny is now equivalent to around 2 seconds of work so it is not worth the opportunity cost (compared to the past) of the time it takes to worry about a penny.

The economic principle behind this story is the 2nd principle of microeconomics which is “the cost of something is what you gave up to get it”

C. When ones says to “Christmas treed” and exam, the idea of filling in answers to test questions one don't know randomly comes to mind. Have I ever something like this? Yes. In high school, I have always worked hard to get good grades since I wanted a high GPA. Because of that, I would “Christmas tree” an exam with very long answers to questions I didn’t get so teachers have less incentive to read my paper and just give it a full mark. Even if I didn’t know what I was talking about, I would put in key words, I feel, the teacher was looking for. Both of us had incentives. I wrote a lot and tried to make it sound like I understood what I was talking about with the incentive that the teacher might skim over it and give me a full score. My teacher’s incentive is to grade as fast as he or she could so he or she could do something else and as a result give me a random grade.

The economic principle behind...