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chapter1 1.Economists say this phrase to summarize the lesson in making decisions. Therefore, they mean that people have to lose something in order to gain something. Hence, making decisions are comparing the loss to the gain. As a result, through decision we make, we give up something in order to gain what we want. 2.Her opportunity cost of staying home and watching t.v. by herself is the enjoyment she'd have at the movies with her friend. Making the choice to stay home, she gave up the fun she'd have with her friend at the movies. 3. The buyers would buy tangerines instead of the oranges. Rational people are sensitive to incentives. Price plays as a major motivator in convincing the buyers to purchase a certain good. Therefore, a rise in price will make the people search for another good with a less price. 4. They consider the marginal costs as well as looking at the big picture

5.  A market economy is a free market. Therefore, individuals make negligible influences in the market. Moreover, it's many firms and households that influence the market as a whole. People aren't helping each other,but rather competing. Moreover, decisions are made by many households and firms.

6. The cost of something is always the amount of money you pay to get it. (True/ __False)__ False- the cost of something is the opportunity cost. At times it may be money, but it's not always money. Moreover, it's whatever you give up to gain something. 7. When the price of Starbucks rises, rational people decide to go to Coffee Bean. (__True__/False) True- rational people react to incentives. As a result, they choose to go to an alternative place if the price of Starbucks rises. Therefore, they'd go to Coffee Bean, where the price hasn't altered.