Intro 1 The Ordinary Business of Life First Principles The Invisible Hand 1. Southwest Airlines has made it difficult for other airlines to operate profitably. When Southwest Airlines seeks its own self-interest, does society benefit? Explain. 2. OPEC (Organization of the Petroleum Exporting Countries) exercises considerable control over the supply and price of petroleum. When OPEC seeks its own self-interest, does society benefit? Explain. Individual Choice: The Core of Economics 3. The choices of individuals, firms, and governments determine which products are produced within the United States. Whose choices were most important in determining that “The Hills” would be produced for television? 1-1 4. 5. 1 1-2 (KW, p.18, #2)1 Describe some of the opportunity costs when you decide to do the following: a. Loan $2,000 to your brother rather than keep the money in your bank account. b. Take the ski train to Winter Park rather than drive. Describe how a marginal analysis might explain the following decisions. a. Max has already spent ten hours working on a term paper. The night before the paper is due, he decides to spend another two hours on the paper (but no more than two hours.) b. Alicia likes Chipotle burritos but never has more than two per week. This notation is used to designate questions based on problems from Microeconomics. Paul Krugman and Robin Wells. Worth Publishers: New York, 2005. Interaction: How Economies Work 6. 7. (KW, p.19, #8) For each of the following indicate whether or not it describes an equilibrium. Explain your reasoning. a. Many people regularly commute from Parker to downtown Denver. Due to traffic congestion, the trip takes 55 minutes when you travel by highway and 45 minutes when you go by side streets. b. The snack bar in the university student center charges $1.50 for a cup of coffee. Students can buy an identical cup of coffee for $1.00 at the coffee shop on the edge of campus. (KW, p.19, #9) In each of the following cases, indicate whether you think the situation is efficient or not. Explain. If it is not efficient, what actions would make it efficient? a. Electricity is included in the rent at your dorm. Some residents in your dorm leave lights, computers, and appliances on when they are not in their rooms. 1-3 b. 8. 1-4 When the Colorado Rockies make it to the 2008 World Series, they put tickets on sale at the Coors Field box office on a first come, first served basis. Individual tickets range in price from $600 to $1,500. (KW, p.19, #11) Governments often adopt certain policies in order to promote desired behavior among their citizens. For each of the following policies, determine what the incentive is and what behavior the government wishes to promote. In each case, why do you think that the government might wish to change people’s behavior, rather than allow their actions to be solely determined by individual choice? a. A tax of $5 per pack is imposed on cigarettes. b. The government pays parents $100 when their child is vaccinated for measles.