MT445 Unit 1 Assignment: Evaluating Economic Principles and Decisions

This economics assignment analyzes various economic principles, including microeconomics versus macroeconomics, positive versus normative economics, and the impact of different scenarios on production possibilities. The assignment addresses several questions, such as identifying whether specific issues are microeconomic or macroeconomic in nature, differentiating between positive and normative economic statements, and evaluating how factors like changes in vacation time, immigration, retirement age, and skilled workforce migration affect the production possibility frontier. Furthermore, the assignment delves into the concept of opportunity cost, examining how factors such as unemployment rates, wage rates, labor demand, and income taxes influence the opportunity cost for a stay-at-home parent. The provided answers demonstrate a clear understanding of economic concepts and their practical applications, supported by proper referencing in APA format.

Running head: ECONOMIC PRINCIPLES
Economic Principles
Name of the Student
Name of the University
Author note

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ECONOMIC PRINCIPLES
Table of Contents
Answer to Question 1(i)...................................................................................................................2
Answer to Question 1(ii).................................................................................................................2
Answer to Question 1(iii)................................................................................................................2
Answer to Question 1(iv).................................................................................................................2
Answer to Question 1(v)..................................................................................................................2
Answer to Question 2(i)...................................................................................................................2
Answer to Question 2(ii).................................................................................................................2
Answer to Question 2(iii)................................................................................................................3
Answer to Question 2(iv).................................................................................................................3
Answer to Question 3(i)...................................................................................................................3
Answer to Question 3(ii).................................................................................................................3
Answer to Question 3(iii)................................................................................................................3
Answer to Question 3(iv).................................................................................................................3
Answer to Question 4(a)..................................................................................................................4
Answer to Question 4(b)..................................................................................................................4
Answer to Question 4(c)..................................................................................................................4
Answer to Question 4(d)..................................................................................................................4
References........................................................................................................................................5

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ECONOMIC PRINCIPLES
Answer to Question 1(i)
The price setting is a decision taken by the firm. Thus, it is a microeconomic issue.
Answer to Question 1(ii)
The tax policies affects the economy as a whole. Thus, it is a macroeconomic issue
(Johnson, 2017).
Answer to Question 1(iii)
The decision of the household for a vacation is an individual phenomenon. Hence, it is a
microeconomic issue.
Answer to Question 1(iv)
The decision of the worker is an individual phenomenon. Thus, it is a microeconomic
issue.
Answer to Question 1(v)
The government policies designed for addressing problems with the social security
program is a decision of the government. Hence, it is a macroeconomic issue.
Answer to Question 2(i)
The given statement is a positive economic statement.
Answer to Question 2(ii)
The given statement is a normative economic statement (Colander & Su, 2015).
Answer to Question 2(iii)
The given statement is a normative economic statement.

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ECONOMIC PRINCIPLES
Answer to Question 2(iv)
The given statement is a positive economic statement.
Answer to Question 3(i)
Here, the average length of annual vacation in the US falls. Thus, there is no changes in
the production possibilities of United States. As there is no impact on the output of the economy.
Therefore, it does not affect the production possibilities of the US.
Answer to Question 3(ii)
Here, the immigration of foreign workers rises in the US. As a result, the number of
laborers of the country increases. In addition, the level of production increases and it shifts
production possibilities outward.
Answer to Question 3(iii)
Here, the retirement age of the people in the US hikes. As a result, it increases the
employment force of the country. In addition, there is an improvements in the output of the
country. Therefore, the production possibilities shifts outward (Mert, 2016).
Answer to Question 3(iv)
When there is migration of skilled workforce of U.S. to Europe, it decreases the number
of skilled labor forces of the country. As a result, the efficiency of production hampers. Hence,
the production possibilities of U.S. shifts inward.
Answer to Question 4(a)
Here, the opportunity cost for the stay at home dad or mom is the value to forgo the best
alternative. Thus, when there is high unemployment rate, the opportunity cost of stay-at-home

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ECONOMIC PRINCIPLES
mom or dad decreases (Chodorow-Reich & Karabarbounis, 2016). In this scenario, the
opportunity cost decreases due to higher unemployment rate.
Answer to Question 4(b)
When there is low average wage rate in the economy, the value of opportunity cost
decreases for the stay-at-home dad or mom. In this scenario, the opportunity cost decreases due
to lower income.
Answer to Question 4(c)
When there is high demand for labor due to improvements in economic conditions, the
value of opportunity costs for the stay-at-home dad or mom increases. In this scenario, the
opportunity cost decreases due to higher labor demand.
Answer to Question 4(d)
When government lowered the income taxes on wages earned, the opportunity costs for
stay-at-home dad or mom increases. In this scenario, the opportunity cost increases due to higher
income.

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ECONOMIC PRINCIPLES
References
Chodorow-Reich, G., & Karabarbounis, L. (2016). The cyclicality of the opportunity cost of
employment. Journal of Political Economy, 124(6), 1563-1618.
Colander, D., & Su, H. C. (2015). Making sense of economists' positive-normative
distinction. Journal of Economic Methodology, 22(2), 157-170.
Johnson, H. G. (2017). Macroeconomics and monetary theory. Routledge.
Mert, M. (2016). A Note on the Relationship among the Shape of the Production Possibility
Frontier,‘Returns to Scale’and ‘Returns to Factors’ under Cobb–Douglas Production
Function. Studies in Microeconomics, 4(2), 173-184.