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j Cj hj aj pj tj ej r
1 WHAT IS E j j
CONOMICS?
S o l u t i o n M a n u a l E c o n o m i c s 13 t h G l o b a l E d i t i o n
j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j
by M i c h a e l P a r k i n A l l C h a p t e r s s o l u t i o n s
j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j
1. Listjsomejexamplesjofjthejscarcityjthatjyoujface.
Examplesjofjscarcityjcommonjtojstudentsjincludejnotjenoughjincomejtojaffordjbothjtuitionjandj
ajnicejcar,jnotjenoughjlearningjcapacityjtojstudyjforjbothjanjeconomicsjexamjandjajchemistryje
xamjinjonejnight,jandjnotjenoughjtimejtojallowjextensivejstudyingjandjextensivejsocializing.
2. Findjexamplesjofjscarcityjinjtoday’sjheadlines.
AjheadlinejinjThejBaltimorejSunjonjJunej20,j2017jwasj“DavisjSaysjSpecialjDeploymentjHelpe
djStalljViolence.”jThejstoryjpresentedjPolicejCommissionerjKevinjDavisjstatingjthatjajweek-
longjdeploymentjofjuniformedjpolicejofficersjonjthejstreetsjofjBaltimorejhelpedjreducejshootin
gsjinjthejcity.jButjthejstoryjpointedjoutjthejrolejofjscarcityjwhenjCommissionerjDavisjsaidjthatj“
thejdeploymentjwasjnotjsustainablejoverjthejlongjterm”jduejtojitsjcost.
3. Findjanjexamplejofjthejdistinctionjbetweenjmicroeconomicsjandjmacroeconomicsjinjtoday’s
headlines.
1
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 2j
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Microeconomics:jOnjJunej20,j2017jajheadlinejinjEastjBayjTimesjwasj“RealityjvsjFantasy:jFTC
jtojBlockjFanDuel-
DraftKingsjMerger.”jThisjstoryjcoversjajmicroeconomicjtopicjbecausejitjdiscussesjhowjtwojon
-
linejfantasyjsportsjsites,jwhichjwerejtryingjtojmerge,jnowjfacedjoppositionjbyjthejFederaljTrad
ejCommissionj(FTC)jwhichjannouncedjitjwouldjchallengejthejmerger.jMacroeconomics:jOnjJ
unej20,j2017,jajheadlinejinjThejWalljStreetjJournaljwasj“RyanjTalksjUpjLikelihoodjofjTaxjOv
erhaul.”jThisjstoryjcoversjajmacroeconomicjtopicjbecausejitjconcernsjtaxesjthatjaffectjeveryjbu
sinessjandjindividualjinjthejentirejeconomy.
Pagej43
1. Describejthejbroadjfactsjaboutjwhat,jhow,jandjforjwhomjgoodsjandjservicesjarejproduced.j Whatjg
etsjproducedjisjsignificantlyjdifferentjtodayjthanjinjthejpast.jTodayjthejU.S.jeconomyjproducesj
morejservices,jsuchjasjmedicaljoperations,jteaching,jandjhairjstyling,jthanjgoods,jsuchjasjpizza
,jautomobiles,jandjcomputers.jHowjgoodsjandjservicesjarejproducedjisjbyjbusinessesjdetermin
ingjhowjthejfactorsjofjproduction,jland,jlabor,jcapitaljandjentrepreneurship,jarejcombinedjtojm
akejthejgoodsjandjservicesjwejconsume.jLandjincludesjalljnaturaljresources,jbothjrenewablejna
turaljresourcesjsuchjasjwood,jandjnonrenewablejnaturaljresourcesjsuchjasjnaturaljgas.jLabor’sj
qualityjdependsjonjpeople’sjhumanjcapital.jInjthejU.S.jeconomy,jhumanjcapitaljobtainedjthrou
ghjschoolingjhasjincreasedjoverjthejyears
withjfarjmorejpeoplejcompletingjhighjschooljandjattendingjcollegejthanjinjpastjyears.jFinally,jfo
rjwhomjarejgoodsjandjservicesjtojbejproducedjdependsjonjthejwayjincomejisjdistributedjto
U.S.jcitizens.jThisjdistributionjisjnotjequal;jthej20jpercentjofjpeoplejwithjthejlowestjincomejear
njaboutj5jpercentjofjthejnation’sjtotaljincomejwhilejthej20jpercentjofjpeoplejwithjthejhighestjin
comesjearnjaboutj50jpercentjofjtotaljincome.jOnjthejaverage,jmenjearnjmorejthanjwomen,jwhit
esjmorejthanjnon-whites,jandjcollegejgraduatesjmorejthanjhighjschooljgraduates.
2. Usejheadlinesjfromjthejrecentjnewsjtojillustratejthejpotentialjforjconflictjbetweenjself-
interestjandjthejsocialjinterest.
Onejexamplejofjanjissuejconcernsjthejusejofjajschooljboard’sjcreditjcardjtojmakejpersonaljpurc
hases.jAjJunej20,j2017jheadlinejfromjStarjTribunejwasj“ShakopeejBoardjApprovesjSuperinten
dent’sjResignationjWilljPayjHimj$50,000.”jThisjstoryjdiscussesjthejsuperintendent’sjusejofjajs
chooljboardjcreditjcardjtojbuyjitemsjsuchjasjajtelevisionjandjtripjto
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 3j
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Nashville.jThejsuperintendentjwasjfollowingjhisjself-
interestjbecausejhejmayjnotjhavejrepaidjthejpurchasesjhadjtheyjnotjbeenjuncovered.jThejschoolj
boardjchairjsaidj“Injlightjofjthejcurrentjissuesjfacingjthejschooljdistrict,jthejschooljboardjfeelj(si
c)jthatjajchangejinjleadershipjisjwarranted.”jThejchairjbelievesjthatjthejsocialjinterestjisjservedjb
yjhavingjajnewjsuperintendentjwithoutjthejissuejofjmisusejofjajcreditjcardjhangingjoverjhisjorjh
erjhead.
Pagej46
1. Explainjthejideajofjajtradeoffjandjthinkjofjthreejtradeoffsjthatjyoujhavejmadejtoday.
Ajtradeoffjreflectsjthejpointjthatjwhenjsomeonejgetsjonejthing,jsomethingjelsejmustjbejgivenjup
.jWhatjisjgivenjupjisjthejopportunityjcostjofjwhateverjisjobtained.jThreejexamplesjofjtradeoffsjt
hatjarejcommonjtojstudentsjinclude:ja)jWhenjajstudentjsleepsjinjratherjthanjgoingjtojhisjorjherje
arlyjmorningjeconomicsjclass,jthejstudentjtradesjoffjadditionaljsleepjforjstudyjtime.jThejopport
unityjcostjofjthejdecisionjisjajlowerjgradejonjthejexam.jb)jWhenjajstudentjrunningjlatejforjclassj
parksjhisjorjherjcarjillegally,jthejstudentjtradesjoffjsavingjtimejforjthejriskjofjajticket.jThejpotent
ialjopportunityjcostjofjthejdecisionjisjthejgoodsjandjservicesjthatjcannotjbejpurchasedjifjthejstud
entjreceivesjanjexpensivejparkingjticket.jc)jAjstudentjtradesjoffjhigherjincomejbyjspendingjtim
ejduringjthejdayjworkingjatjajpart-
timejjobjforjlessjtimejspentjatjleisurejtimejandjstudy.jThejopportunityjcostjforjthejhigherjincome
jisjlessjleisurejandjlowerjgradesjinjclasses.
2. Explainjwhatjeconomistsjmeanjbyjrationaljchoicejandjthinkjofjthreejchoicesjthatjyou’vejmade
todayjthatjarejrational.
Ajrationaljchoicejisjonejthatjcomparesjthejcostsjandjbenefitsjofjthejdifferentjactionsjandjthenjch
oosesjthejactionjthatjhasjthejgreatestjbenefitjoverjcostjforjthejpersonjmakingjthejchoice.
Threejrationaljchoicesjmadejbyjstudentsjinclude:ja)jThejchoicejtojskipjbreakfastjtojgojtojclass.jI
njthisjcasejthejbenefitjisjthejhigherjgradejinjthejclassjandjthejcostjisjthejbreakfastjforgone.jb)jThe
jchoicejtojstopjtalkingjwithjajfriendjonjthejphonejandjstartjstudyingjforjanjimpendingjexam.jInjth
isjcasejthejbenefitjisjthejresultingjhigherjgradejinjthejclassjandjthejcostjisjthejconversationjforgo
ne.jc)jThejchoicejtojdojlaundryjtodayjratherjthanjwatchjtelevision.jInjthisjcasejthejbenefitjisjthejf
actjthejstudentjwilljhavejcleanjclothesjtojwearjandjthejcostjisjthejlossjofjthejentertainmentjthejtel
evisionjshowjwouldjhavejprovided.
3. Explainjwhyjopportunityjcostjisjthejbestjforgonejalternativejandjprovidejexamplesjofjsomejo
pportunityjcostsjthatjyoujhavejfacedjtoday.
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 4j
?
Whenjajdecisionjtojundertakejonejactivityjisjmade,joftenjmanyjalternativejactivitiesjarejnojlonge
rjpossible.jOftenjthesejactivitiesjarejmutuallyjexclusivejsojonlyjthejhighestjvaluedjalternativejisj
actuallyjforgone.jForjinstance,jthejdecisionjtojgojtojajstudent’sj8:30jAMjclassjeliminatesjthejpos
sibilityjofjsleepingjinjduringjthejhourjandjofjjoggingjduringjthejhour.jButjinjthisjcase,jitjisjimposs
iblejtojbothjsleepjinjandjtojjogjduringjthejhour,jsojthejopportunityjcostjcannotjbejbothjactivities.j
Whatjisjlostjisjonlyjthejactivityjthatjotherwisejwouldjhavejbeenjchosen—
eitherjsleepingjinjorjjogging—
whichjisjwhateverjactivityjwouldjhavejbeenjchosen,jthatjis,jthejmostjhighlyjvaluedjofjthejforgon
ejalternatives.jForjstudents,jattendingjclass,jdoingjhomework,jstudyingjforjajtestjarejalljactivitie
sjwithjopportunityjcosts.
4. Explainjwhatjitjmeansjtojchoosejatjthejmarginjandjillustratejwithjthreejchoicesjatjthejmarginjthatjyo
ujhavejmadejtoday.
Choosingjatjthejmarginjmeansjchoosingjtojdojajlittlejmorejorjajlittlejlessjofjsomejactivity.jThreej
commonjexamplesjstudentsjencounterjare:ja)jWhenjajstudentjfacesjajchemistryjandjanjeconomi
csjfinaljexamjinjonejday,jthejstudentjmustjdeterminejwhetherjspendingjthejlastjhourjstudyingjajl
ittlejmorejchemistryjorjajlittlejmorejeconomicsjwilljyieldjajbetterjcontributionj(marginaljbenefit
)jtojhisjorjherjoveralljGPA.j b)jAjcollegejstudentjbuyingjajcomputerjmustjdecidejwhetherjthejma
rginaljbenefitjofjaddingj1jGBjofjadditionaljmemoryjisjworthjthejmarginaljcostjofjthejadditionalj
memory.j c)jAjstudentjfootballjfanjwithjajchoicejofjajcheapjseatjinjthejstudentjbleachersjlocatedj
atjthejfarjendjofjthejplayingjfieldjorjajmorejexpensivejseatjlocatedjonjthej30jyardjlinejmustjdeter
minejwhetherjthejmarginaljbenefitjofjwatchingjthejgamejfromjajbetterjseatjisjworthjthejmargina
ljcostjofjthejhigherjticketjprice.
5. Explainjwhyjchoicesjrespondjtojincentivesjandjthinkjofjthreejincentivesjtojwhichjyoujhavejre
spondedjtoday.
Peoplejmakingjrationaljdecisionsjcomparejthejmarginaljbenefitsjofjdifferentjactionsjtojtheirjmar
ginaljcosts.jThereforejpeople’sjchoicesjchangejwhenjtheirjincentives,jthatjisjthejmarginaljbenefi
tjand/orjmarginaljcost,jofjthejchoicejchanges.jJustjasjeveryonejelse,jstudentsjrespondjtojincentive
s;ja)jAjstudentjstudiesjbecausejofjthejincentivesjofferedjbyjgrades.jb)jAjstudentjisjmorejlikelyjtoj
attendjajclassjifjattendancejisjfactoredjintojthejgrade.jc)jAjstudentjmightjattendjajmeetingjofjajclu
bjifjthejstudent’sjsignificantjotherjisjeagerjtojattendjthejmeeting.
Pagej47
1. Distinguishjbetweenjajpositivejstatementjandjajnormativejstatementjandjprovidejexamples.
j Cj hj aj pj tj ej r
1 WHAT IS E j j
CONOMICS?
S o l u t i o n M a n u a l E c o n o m i c s 13 t h G l o b a l E d i t i o n
j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j
by M i c h a e l P a r k i n A l l C h a p t e r s s o l u t i o n s
j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j j
1. Listjsomejexamplesjofjthejscarcityjthatjyoujface.
Examplesjofjscarcityjcommonjtojstudentsjincludejnotjenoughjincomejtojaffordjbothjtuitionjandj
ajnicejcar,jnotjenoughjlearningjcapacityjtojstudyjforjbothjanjeconomicsjexamjandjajchemistryje
xamjinjonejnight,jandjnotjenoughjtimejtojallowjextensivejstudyingjandjextensivejsocializing.
2. Findjexamplesjofjscarcityjinjtoday’sjheadlines.
AjheadlinejinjThejBaltimorejSunjonjJunej20,j2017jwasj“DavisjSaysjSpecialjDeploymentjHelpe
djStalljViolence.”jThejstoryjpresentedjPolicejCommissionerjKevinjDavisjstatingjthatjajweek-
longjdeploymentjofjuniformedjpolicejofficersjonjthejstreetsjofjBaltimorejhelpedjreducejshootin
gsjinjthejcity.jButjthejstoryjpointedjoutjthejrolejofjscarcityjwhenjCommissionerjDavisjsaidjthatj“
thejdeploymentjwasjnotjsustainablejoverjthejlongjterm”jduejtojitsjcost.
3. Findjanjexamplejofjthejdistinctionjbetweenjmicroeconomicsjandjmacroeconomicsjinjtoday’s
headlines.
1
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 2j
?
Microeconomics:jOnjJunej20,j2017jajheadlinejinjEastjBayjTimesjwasj“RealityjvsjFantasy:jFTC
jtojBlockjFanDuel-
DraftKingsjMerger.”jThisjstoryjcoversjajmicroeconomicjtopicjbecausejitjdiscussesjhowjtwojon
-
linejfantasyjsportsjsites,jwhichjwerejtryingjtojmerge,jnowjfacedjoppositionjbyjthejFederaljTrad
ejCommissionj(FTC)jwhichjannouncedjitjwouldjchallengejthejmerger.jMacroeconomics:jOnjJ
unej20,j2017,jajheadlinejinjThejWalljStreetjJournaljwasj“RyanjTalksjUpjLikelihoodjofjTaxjOv
erhaul.”jThisjstoryjcoversjajmacroeconomicjtopicjbecausejitjconcernsjtaxesjthatjaffectjeveryjbu
sinessjandjindividualjinjthejentirejeconomy.
Pagej43
1. Describejthejbroadjfactsjaboutjwhat,jhow,jandjforjwhomjgoodsjandjservicesjarejproduced.j Whatjg
etsjproducedjisjsignificantlyjdifferentjtodayjthanjinjthejpast.jTodayjthejU.S.jeconomyjproducesj
morejservices,jsuchjasjmedicaljoperations,jteaching,jandjhairjstyling,jthanjgoods,jsuchjasjpizza
,jautomobiles,jandjcomputers.jHowjgoodsjandjservicesjarejproducedjisjbyjbusinessesjdetermin
ingjhowjthejfactorsjofjproduction,jland,jlabor,jcapitaljandjentrepreneurship,jarejcombinedjtojm
akejthejgoodsjandjservicesjwejconsume.jLandjincludesjalljnaturaljresources,jbothjrenewablejna
turaljresourcesjsuchjasjwood,jandjnonrenewablejnaturaljresourcesjsuchjasjnaturaljgas.jLabor’sj
qualityjdependsjonjpeople’sjhumanjcapital.jInjthejU.S.jeconomy,jhumanjcapitaljobtainedjthrou
ghjschoolingjhasjincreasedjoverjthejyears
withjfarjmorejpeoplejcompletingjhighjschooljandjattendingjcollegejthanjinjpastjyears.jFinally,jfo
rjwhomjarejgoodsjandjservicesjtojbejproducedjdependsjonjthejwayjincomejisjdistributedjto
U.S.jcitizens.jThisjdistributionjisjnotjequal;jthej20jpercentjofjpeoplejwithjthejlowestjincomejear
njaboutj5jpercentjofjthejnation’sjtotaljincomejwhilejthej20jpercentjofjpeoplejwithjthejhighestjin
comesjearnjaboutj50jpercentjofjtotaljincome.jOnjthejaverage,jmenjearnjmorejthanjwomen,jwhit
esjmorejthanjnon-whites,jandjcollegejgraduatesjmorejthanjhighjschooljgraduates.
2. Usejheadlinesjfromjthejrecentjnewsjtojillustratejthejpotentialjforjconflictjbetweenjself-
interestjandjthejsocialjinterest.
Onejexamplejofjanjissuejconcernsjthejusejofjajschooljboard’sjcreditjcardjtojmakejpersonaljpurc
hases.jAjJunej20,j2017jheadlinejfromjStarjTribunejwasj“ShakopeejBoardjApprovesjSuperinten
dent’sjResignationjWilljPayjHimj$50,000.”jThisjstoryjdiscussesjthejsuperintendent’sjusejofjajs
chooljboardjcreditjcardjtojbuyjitemsjsuchjasjajtelevisionjandjtripjto
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 3j
?
Nashville.jThejsuperintendentjwasjfollowingjhisjself-
interestjbecausejhejmayjnotjhavejrepaidjthejpurchasesjhadjtheyjnotjbeenjuncovered.jThejschoolj
boardjchairjsaidj“Injlightjofjthejcurrentjissuesjfacingjthejschooljdistrict,jthejschooljboardjfeelj(si
c)jthatjajchangejinjleadershipjisjwarranted.”jThejchairjbelievesjthatjthejsocialjinterestjisjservedjb
yjhavingjajnewjsuperintendentjwithoutjthejissuejofjmisusejofjajcreditjcardjhangingjoverjhisjorjh
erjhead.
Pagej46
1. Explainjthejideajofjajtradeoffjandjthinkjofjthreejtradeoffsjthatjyoujhavejmadejtoday.
Ajtradeoffjreflectsjthejpointjthatjwhenjsomeonejgetsjonejthing,jsomethingjelsejmustjbejgivenjup
.jWhatjisjgivenjupjisjthejopportunityjcostjofjwhateverjisjobtained.jThreejexamplesjofjtradeoffsjt
hatjarejcommonjtojstudentsjinclude:ja)jWhenjajstudentjsleepsjinjratherjthanjgoingjtojhisjorjherje
arlyjmorningjeconomicsjclass,jthejstudentjtradesjoffjadditionaljsleepjforjstudyjtime.jThejopport
unityjcostjofjthejdecisionjisjajlowerjgradejonjthejexam.jb)jWhenjajstudentjrunningjlatejforjclassj
parksjhisjorjherjcarjillegally,jthejstudentjtradesjoffjsavingjtimejforjthejriskjofjajticket.jThejpotent
ialjopportunityjcostjofjthejdecisionjisjthejgoodsjandjservicesjthatjcannotjbejpurchasedjifjthejstud
entjreceivesjanjexpensivejparkingjticket.jc)jAjstudentjtradesjoffjhigherjincomejbyjspendingjtim
ejduringjthejdayjworkingjatjajpart-
timejjobjforjlessjtimejspentjatjleisurejtimejandjstudy.jThejopportunityjcostjforjthejhigherjincome
jisjlessjleisurejandjlowerjgradesjinjclasses.
2. Explainjwhatjeconomistsjmeanjbyjrationaljchoicejandjthinkjofjthreejchoicesjthatjyou’vejmade
todayjthatjarejrational.
Ajrationaljchoicejisjonejthatjcomparesjthejcostsjandjbenefitsjofjthejdifferentjactionsjandjthenjch
oosesjthejactionjthatjhasjthejgreatestjbenefitjoverjcostjforjthejpersonjmakingjthejchoice.
Threejrationaljchoicesjmadejbyjstudentsjinclude:ja)jThejchoicejtojskipjbreakfastjtojgojtojclass.jI
njthisjcasejthejbenefitjisjthejhigherjgradejinjthejclassjandjthejcostjisjthejbreakfastjforgone.jb)jThe
jchoicejtojstopjtalkingjwithjajfriendjonjthejphonejandjstartjstudyingjforjanjimpendingjexam.jInjth
isjcasejthejbenefitjisjthejresultingjhigherjgradejinjthejclassjandjthejcostjisjthejconversationjforgo
ne.jc)jThejchoicejtojdojlaundryjtodayjratherjthanjwatchjtelevision.jInjthisjcasejthejbenefitjisjthejf
actjthejstudentjwilljhavejcleanjclothesjtojwearjandjthejcostjisjthejlossjofjthejentertainmentjthejtel
evisionjshowjwouldjhavejprovided.
3. Explainjwhyjopportunityjcostjisjthejbestjforgonejalternativejandjprovidejexamplesjofjsomejo
pportunityjcostsjthatjyoujhavejfacedjtoday.
, WjHjAjTj IjSj EjCjOjNjOjMjIjCjSj 4j
?
Whenjajdecisionjtojundertakejonejactivityjisjmade,joftenjmanyjalternativejactivitiesjarejnojlonge
rjpossible.jOftenjthesejactivitiesjarejmutuallyjexclusivejsojonlyjthejhighestjvaluedjalternativejisj
actuallyjforgone.jForjinstance,jthejdecisionjtojgojtojajstudent’sj8:30jAMjclassjeliminatesjthejpos
sibilityjofjsleepingjinjduringjthejhourjandjofjjoggingjduringjthejhour.jButjinjthisjcase,jitjisjimposs
iblejtojbothjsleepjinjandjtojjogjduringjthejhour,jsojthejopportunityjcostjcannotjbejbothjactivities.j
Whatjisjlostjisjonlyjthejactivityjthatjotherwisejwouldjhavejbeenjchosen—
eitherjsleepingjinjorjjogging—
whichjisjwhateverjactivityjwouldjhavejbeenjchosen,jthatjis,jthejmostjhighlyjvaluedjofjthejforgon
ejalternatives.jForjstudents,jattendingjclass,jdoingjhomework,jstudyingjforjajtestjarejalljactivitie
sjwithjopportunityjcosts.
4. Explainjwhatjitjmeansjtojchoosejatjthejmarginjandjillustratejwithjthreejchoicesjatjthejmarginjthatjyo
ujhavejmadejtoday.
Choosingjatjthejmarginjmeansjchoosingjtojdojajlittlejmorejorjajlittlejlessjofjsomejactivity.jThreej
commonjexamplesjstudentsjencounterjare:ja)jWhenjajstudentjfacesjajchemistryjandjanjeconomi
csjfinaljexamjinjonejday,jthejstudentjmustjdeterminejwhetherjspendingjthejlastjhourjstudyingjajl
ittlejmorejchemistryjorjajlittlejmorejeconomicsjwilljyieldjajbetterjcontributionj(marginaljbenefit
)jtojhisjorjherjoveralljGPA.j b)jAjcollegejstudentjbuyingjajcomputerjmustjdecidejwhetherjthejma
rginaljbenefitjofjaddingj1jGBjofjadditionaljmemoryjisjworthjthejmarginaljcostjofjthejadditionalj
memory.j c)jAjstudentjfootballjfanjwithjajchoicejofjajcheapjseatjinjthejstudentjbleachersjlocatedj
atjthejfarjendjofjthejplayingjfieldjorjajmorejexpensivejseatjlocatedjonjthej30jyardjlinejmustjdeter
minejwhetherjthejmarginaljbenefitjofjwatchingjthejgamejfromjajbetterjseatjisjworthjthejmargina
ljcostjofjthejhigherjticketjprice.
5. Explainjwhyjchoicesjrespondjtojincentivesjandjthinkjofjthreejincentivesjtojwhichjyoujhavejre
spondedjtoday.
Peoplejmakingjrationaljdecisionsjcomparejthejmarginaljbenefitsjofjdifferentjactionsjtojtheirjmar
ginaljcosts.jThereforejpeople’sjchoicesjchangejwhenjtheirjincentives,jthatjisjthejmarginaljbenefi
tjand/orjmarginaljcost,jofjthejchoicejchanges.jJustjasjeveryonejelse,jstudentsjrespondjtojincentive
s;ja)jAjstudentjstudiesjbecausejofjthejincentivesjofferedjbyjgrades.jb)jAjstudentjisjmorejlikelyjtoj
attendjajclassjifjattendancejisjfactoredjintojthejgrade.jc)jAjstudentjmightjattendjajmeetingjofjajclu
bjifjthejstudent’sjsignificantjotherjisjeagerjtojattendjthejmeeting.
Pagej47
1. Distinguishjbetweenjajpositivejstatementjandjajnormativejstatementjandjprovidejexamples.
