Study Guides (248,075)
Canada (121,283)
Economics (171)
ECON 110 (53)


2 Pages
Unlock Document

ECON 110
Ian James Cromb

A1-1. False. Opportunity cost is the value of the next best alternative foregone. In this case, the value of the best alternative (which is only one on the night) is my total benefit minus my total cost from the alternative. Any alternative’s value is the net benefit. Attending Bieber’s concert is worth to me up to 50$ whereas actually attending his concert will cost me $40. Thus I am giving up the $10 and so the opportunity cost of seeing the Hip is $10. A1-2. True. An increase in household income increases their ability and willingness to buy more goods and services. This means that demand from households increase, causing firms to experience a rise in sales and in turn an increase in revenue due to the greater number of goods and services sold. This explanation is supported by the concept of the circular flow of income and expenditure showing how economic agents are linked. When households receive a greater income from selling their factors of production (land, labour, capital) to firms, this increases the payments they receive for them. These payments or income is then spent on more goods and services, which increases the revenue of firms. A1-3. True. This is a purely positive economic statement as it can be testified and there is no value judgment involved. An endogenous variable is one whose value is determined within the theory. In this case when the Government taxes, the variables affected would be the price and quantity. An increase in tax has a direct effect on price and quantity because it increases the price of what is taxed and an increase in price of anything decreases the quantity demanded by individuals. This in turn means less people will consume gas as it has become expensive and this will help reducing the emissions, which is the exogenous variable. however we should keep in mind that not all positive statement are necessarily true. So although increase in tax has a direct effect on price, it may not reduce the quantity of gasoline sold because people will still want to continue driving and these days a car has become a necessity and key mean of transport. So in turn, even the reduction in pollution emission may not be true due to this however this statement can clearly be testified hence it is positive. A1-4. The opportunity cost for Japan to produce 1 computer is 3 cell phones whereas for Finland, the opportunity cost of producing 1 computer is 4 cell phones. This shows that Japan has a competitive advantage in producing computers and Finland has it in producing cell phones, because for 1 unit of resource Finland produces 4 cell phones as opposed to Japan's 3 cell phones and they both produce the same amount of computers but Japan has to give up one less cell phone to do so. Both the countries will be better off once Finland starts trading 1 cell phone for a third or quarter computer with Japan A1-5. Uncertain. Opening an economy to free trade can have several impacts. Firstly it means that a country is now able to pursue its comparative advantage – increase their production and exports of the goods that they are relatively good at producing along with decreasing the production and increasing imports of the goods that they aren’t so good at producing. However there is uncertainty as to what type of products they are trading. For some economies, opening up to trade can mean losing the local market share because now the domestic/local market can import from abroad which will be more cost effective for them. This is an advantage for buyers but may not be for the sellers. Also coming back to what products they are selling – perh
More Less

Related notes for ECON 110

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.