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In this Assessment, you will evaluate economic problems and opportunity costs to make informed economic decisions to effectively use scarce resources. You will also examine factors that affect production possibilities to determine the maximum possible output, given the resources and the current technology.
Instructions: This Assessment presents scenarios in which you will analyze macroeconomic and microeconomic issues, positive and normative economics, shifts in production possibility frontiers, and evaluate the role of opportunity costs in the business decision-making process. It requires a combination of short paragraph answers, computations, and completion of a 450–500 word essay. Answer all of the following questions.
In this Assessment, you will be assessed on the following outcome:
MT445M1: Evaluate opportunity costs in the business decision-making process.

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Section 1: Analyze Microeconomic and Macroeconomic Issues
Analyze whether each of the following is primarily a microeconomic or macroeconomic issue. Briefly explain your answers.
Setting the price for a cup of coffee.

Measuring the impact of tax policies on total household spending in the economy.

A household’s decision regarding whether or not to go on vacation.

A worker’s decision regarding which job to accept.

Designing government policies to address issues with the social security program.

Section 2: Explain Positive and Normative Statements
Explain why each of the following is either a positive or normative economic statement.
A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10%.

The federal government should spend more on diabetes research.

Rising paper prices will increase book prices.

The price of bagels at Bruegger’s is too high.

Section 3: Identify and Explain Shifts in the Production Possibility Frontiers

Explain the effect of each of the following on the United States production possibilities frontier (PPF). Does it shift inward, outward, or not at all? Briefly explain your answers.

A decrease in the average length of annual vacations.

An increase in immigration of foreign workers to the U.S.

An increase in the average retirement age.

The migration of skilled U.S. workers to Europe.

Section 4: Identify and Explain Increase and Decrease in Opportunity Costs

Answer the following in a 450–500 word essay.

An opportunity cost is the value of the best alternative we forgo to make a decision. The decisions we make typically involve constraints such as time, money, and other resources. “There is no free lunch” in our decision-making; we always encounter opportunity costs. If we decide to do something, it often means that we lose the chance to do something else. Therefore, we need to critically evaluate our decision-making to minimize our opportunity costs based on the viable alternative choices available to us at a given period.

Given the above information as the background, assume parents are evaluating the opportunity costs of stay-at-home moms or dads under different scenarios. You should thoroughly explain whether parent’s decision under each of the following scenarios would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home).

a. There is high unemployment rate in the economy. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?
b. There is low average wage rate in the economy. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?
c. There is improvement in the economic conditions that led to high demand for labor. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?
d.  Suppose the government lowered income tax rates on wages earned. What is its impact on the opportunity cost of stay-at-home mom or dad? Does it increase or decrease the opportunity costs?

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