Solutions for Microeconomics for Life, Smart Choices for You, 3rd Canadian Edition Cohen
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Complete Solutions Manual for Microeconomics for Life, Smart Choices for You, 3rd Canadian Edition by Avi J. Cohen ; ISBN13: 9780137656707....***Chapter 6 and 7 solutionsnot included***
.1.What's in Economics for You? Scarcity, Opportunity Cost, Trade, and Models
2.Making Smart Choices: The Law o...
, Instructor’s Manual, Microeconomics for Life: Smart Choices for You, Third Edition
1
What’s in Economics for You?
Scarcity, Opportunity Cost, Trade, and
Models
Learning Objectives
1. Explain scarcity and describe why you must make smart choices among your wants.
2. Define and describe opportunity cost, the most important concept in economics.
3. Describe how comparative advantage, specialization, and trade make us all better off.
4. Explain how models like the circular flow of economic life make smart choices easier.
5. Differentiate microeconomic and macroeconomic choices, and explain the Three Keys
model for smart choices.
Lecture Narrative
George Bernard Shaw’s quote, “Economy is the art of making the most out of life,” introduces
economics and the problem of scarcity. This text defines economics in a way that focuses on the
choices of key players — how individuals, businesses, and governments make the best possible
choices to get what they want, and how those choices interact in markets. Because of scarcity,
choices involve a trade-off, leading to the concept of opportunity cost — the single most
important concept in economics. Incentives are also crucial for understanding choices.
Opportunity cost and comparative advantage are key to understanding why specialization and
voluntary trade make us all better off. The most basic choice is whether to produce for yourself
or to specialize, trade in markets, and depend on others. There is a simple example of two
previously self-sufficient settlers in the same country coming together to trade. This example of
the gains from trade purposefully avoids the politically charged issue of trade between countries,
focusing instead on the general benefits of markets and exchange.
This chapter then introduces models (using a road-map example) and what it means to think like
an economist. The circular flow model reduces the complexity of the economy to three sets of
players who interact in markets—households, businesses, and governments. Without using the
phrase ceteris paribus, the assumptions of “all other things unchanged” are compared to the
mental equivalent of controlled experiments in a laboratory. The positive/normative distinction is
also part of thinking like an economist. Finally, microeconomics and macroeconomics are
distinguished. This chapter also introduces the Three Keys to Smart Choices as the
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, Instructor’s Manual, Microeconomics for Life: Smart Choices for You, Third Edition
microeconomic “model” that focuses attention on the information most useful for making smart
choices:
1. Choose only when additional benefits are greater than additional opportunity costs.
2. Count only additional benefits and additional costs.
3. Be sure to count all additional benefits and costs, including implicit costs and externalities.
Watch “The Five-Minute University” at (https://www.youtube.com/watch?v=kO8x8eoU3L4).
The Three Keys model is what students should remember five years (at least!) after they have
taken introductory economics. This is students’ first look at the Three Keys, which recur
throughout the book.
Graphs, Tables, and Illustrations
Figure Title G, I, T
1.1 Jill’s Production Possibilities T, G
1.2 Marie’s Production T, G
Possibilities
1.3 Opportunity Costs for Jill and T
Marie
1.4 Opportunity Costs for Jill and T
Marie
T
unnumbered Gains from Specialization and
Trade
1.5 Mutually Beneficial Gains G
from Trade
1.6 Circular Flow of Economic I
Life
1.7 Three Keys to Smart Choices I
Key:
G - Graph(s)
I - Illustration
T – Table
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, Instructor’s Manual, Microeconomics for Life: Smart Choices for You, Third Edition
To access the Narrated Dynamic Graph videos for this chapter, log into the Pearson course
website (pearsonmylab.com), click on Chapter Resources, and then Chapter 1.
Active Learning Suggestions
Top Choice First class meetings are often short and focus on
administrative course details. The time could also be used for
a small group activity to help students get to know each other.
For microeconomics, use the policy debate over whether
government should impose a tax on sugary pop to counter obesity.
There has been much press on the topic. In the United States,
former New York City mayor Michael Bloomberg proposed
making giant size soft-drink cups illegal. In Canada, the Heart and
Stroke Foundation called for a tax on sugary drinks
(http://www.ctvnews.ca/health/heart-and-stroke-foundation-calls-
for-tax-on-sugary-drinks-1.1999780). Mike Moffat has an
excellent article in the September 2012 Walrus, “Pop and the Tax
Question” (http://thewalrus.ca/pop-and-the-tax-q/). The
discussion can focus on these policy questions:
You are the Minister of Health and your government is considering a
tax on sugary pop.
1. What are the consequences of this policy — all intended and
unintended consequences? (How do people change their choices after
the sugar tax?)
2. Should the government tax sugary pop? What are the arguments
for and against this policy?
For macroeconomics, the small group exercise focuses on this policy
question:
Assume that Canada is in a deep recession, with high unemployment
and with manufacturing plants closing because of cheap imports from
Asia. The government deficit is growing; inflation is 3 percent.
You are the Minister of Finance. Come up with three policies that
would help Canadians and improve the economy.
This exercise often brings out students’ misconception about
economics (most will suggest high tariffs on imports without
understanding the consequences), and gives you an idea of
what knowledge of economics they bring to this course.
For either group activity, if you have time it adds interest if the
class votes on the best group presentation, and you award candy
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