Answer:
1) Economics is the social science dedicated to the study of:
R = How scarce resources are allocated by different economic systems
2) The following statement is from New York City’s Parking Regulations page: “All of New York City is a designated Tow Away Zone under the State’s Vehicle and Traffic Law. This means that any vehicle parked or operated illegally, or with missing or expired registration or inspection stickers, may be towed.”
Based off this statement, what economic concept best explains why most New Yorkers park correctly?
R = People respond to incentives in a predictable manner. New Yorkers will park legally to prevent their cars from being towed.
3) Which of the following reasons for starting a store is most closely related to an entrepreneur’s motivation for innovation?
R= A computer programmer creates a new computer game that uses new technology to help children with speech impediments.
4) The next best alternative given up when individuals, businesses, and governments confront scarcity by making choices is known as ___.
R = Opportunity cost
5) What is rational economic decision?
R = One in which marginal benefits are greater than marginal costs
Explanation:
1) Economic theory assumes the fact that we live in a world of scarcity and aims to find the most efficient way of allocating scarce resources within an economic system. This is the main purpose of Economics as a social science. It is true that Economics might also study financial institutions, social and political aspects of countries or interactions of societies, but these are secondary topics that economists use to complement their models.
2) Economic science states that people (which assumes as rational) make decisions based mainly on incentives. In this case, the threat of being towed functions as an effective incentive to avoid illegal parking in New York City.
3) Among the four options, the only one which is directly related to innovation is the option that refers to the creation of a new computer game. This appears to be a disruptive invention in the market, while all other options are traditional economic activities.
4) In a world of scarcity, opportunity cost is a concept crafted by economists which refers to the cost of letting go alternative options when making a decision. This means, the potential gain that the decision maker let go when choosing one alternative instead of other(s).
5) Economists use the concept of "marginal" to refer to an additional unit. Thus, marginal benefit refers to the additional utility a consumer obtains by increasing his consumption in one unit, whereas the marginal cost refers to the cost of producing one additional unit. When marginal benefit equals or exceeds marginal cost, a rational economic decision is being made.
