Explain the concepts of opportunity costs and sunk costs.

Answer each of the following questions or problems completely. For written answers, I expect a minimum of one paragraph; for problems show all of your work. Questions will be worth 10 points each.


  1. What is the difference between a change in demand and a change in quantity demanded? Supply and quantity supplied? Give an example of what could cause a change in each?
  2.  Explain how a freely operating market could eliminate shortages and surpluses.(Go through the steps in the process). What role do prices play in this process?
  3.  What is the U.S. GDP for the 1st quarter of 2017? What some of the reasons economists have given for the rather dismal growth rate? How has our GDP done over the past 10 years? List out each year’s GDP. How has China done over the same period? India?
  4.  On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?
  5.  When comparing the GDP of different countries, two issues immediately arise. What are these issues and how does one account for these while comparing the GDP for different countries?
  6.  Say that the average worker in Canada has productivity of $33 per hour while the average worker in the United Kingdom has productivity of $29 per hour (both measured in U.S. dollars). Over the next six years, say that worker productivity in Canada grows at 1% per year while worker productivity in the UK grows 3% per year. At that point, who will have the higher productivity level, and by how much?
  7.  Explain the concepts of opportunity costs and sunk costs. Give two examples for each concept.
  8.  Why is the production possibility curve bowed outward? What are the implications of this shape for society’s choices? What the implications for this concept in your personal life? Explain.
  9.  Draw a supply and demand graph which describes healthcare in a society where all healthcare is provided by the market. Indicate where the uninsured might fall on the graph. Explain the consequences of the graph.
  10.  Now draw on the same graph, the supply and demand for healthcare in countries such as Japan, Great Britain, Taiwan, Germany, and Switzerland (select one). How are the outcomes (price and quantity) different than in pure society dominated by a pure market?