COLEGIO DE LA PURISIMA CONCEPCION

The School of the Archdiocese of Capiz

Roxas City

College of Business, Management and Accountancy

BA 1 – BASIC MICROECONOMICS
First Semester 2020-2021

Name: LIRA S. BALASABAS

Activity 1

1. Describe an important trade-off you recently faced.

ANSWER: A trade-off I recently faced was deciding between sleeping in on the weekend and
waking up early to mow a few extra lawns. On one hand I’d be well rested with less money
or I could make more money, but not have the benefit of sleeping in. I ended up losing some
extra hours of sleep in order to mow more lawns to make more money.

2. Give an example of some action that has both a monetary and nonmonetary opportunity
cost.

ANSWER: Choosing to stay home and study instead of going to the movies with friends
would result in both a monetary and nonmonetary opportunity cost. The monetary
opportunity cost would be the price of the movie ticket and the nonmonetary opportunity
cost would be spending that time with friends.

3. Describe an incentive your parents offered to you in an effort to influence your behavior.

ANSWER: I'm 27 and my parents don't use many incentives on me, however my mom uses
the incentive of earning money to do chores.

4. Why is a country better off not isolating itself from all other countries?

ANSWER: A country is better off and not isolating itself from all the other countries can
access more number of goods and services through trade. The volume of trade can be
enlarged by the process of specialization.

5. Why do we have markets and, according to economists, what roles should government
play in them?

ANSWER: We have markets because households and firms have their best interests at
heart, and it works. The government is simply there to be the enforcer. Property rights are
very important to the market, and the government’s institutions enforce those rights.

6. List and briefly explain the three principles that describe how the economy as a whole
works.
ANSWER: The standard of living from country to country is affected by their level of
productivity. The more productive a country is, the more goods and services they have
available, etc.

Inflation occurs when the government prints a surplus of money.

There is a trade-off between inflation and unemployment. Increase in price can happen
from higher demand, which in turn causes firms to hire more workers to produce more
goods/services.

COLEGIO DE LA PURISIMA CONCEPCION

The School of the Archdiocese of Capiz
 Roxas City

College of Business, Management and Accountancy

BA 1 – BASIC MICROECONOMICS
First Semester 2020-2021

Name: LIRA S. BALASABAS

Activity 2

1. In what sense is economics like a science?

ANSWER:  Economics is like a science because of the scientific theory. Economists take
data and make theories and all that stuff that scientists do. They just can't do much in a
laboratory. They can't create their experiments; they have to observe their experiments. 

2. Define microeconomics and macroeconomics.

ANSWER:
 Micro: Microeconomics is a branch of economics that studies the behavior of
individuals and firms in making decisions regarding the allocation of limited
resources.
 Macro: Macroeconomics is a branch of economics dealing with the performance,
structure, behavior, and decision-making of an economy as a whole.

3. Give an example of a positive statement and a normative statement that somehow relates
to your daily life.

ANSWER: The increase in price of coffee leads to increase in the demand for tea is an
example of a positive statement. The positive statements focus on cause-and-effect and
behavior relationships. The government should restrain the price of coffee is a normative
statement.

4. Why do economists sometimes offer conflicting advice to policymakers?

ANSWER: Economists offer conflicting advice to policymakers because Economists

disagree about the validity of alternative positive theories about how the world works and
they have different values and different normative views about the efficacy of policies.

5. Explain how absolute advantage and comparative advantage differ?

ANSWER: Absolute advantage is the ability to produce a good using fewer inputs than
another producer, while Comparative advantage is the ability to produce a good at a lower
opportunity cost than another producer. One key difference is that one person can have an
absolute advantage in both goods, but it is impossible for one person to have a comparative
advantage in both goods due to the opportunity cost of product being the inverse of the
opportunity cost of the other.

6. Is absolute advantage or comparative advantage more important for trade?

ANSWER: Comparative advantage is more important for trade. Using specialization in a

trade as a basis, if you take the amount of time and skill of a person specializing in a trade
to lower their opportunity cost, it only makes sense to produce a specialized product at a
better lower rate rather than produce everything yourself. Both the farmer and the butcher
can consume more meat and wheat if they trade together.