Check Your Understanding

1. Question

   Provide an example of a resource from each of the four categories of resources.

   Possible examples of the four categories of resources include fisheries (land), time spent working on a fishing boat (labor), fishing nets (capital), and the opening of a new seafoodmarket (entrepreneurship).

2. Question

   What type of resource is each of the following?

   1. time spent flipping hamburgers at a restaurant

      time spent flipping hamburgers at a restaurant: labor

   2. a bulldozer

      a bulldozer: capital

   3. a river

      a river: land

3. Question

   You make $45,000 per year at your current job with Whiz Kids Consultants. You are considering a job offer from Brainiacs, Inc., which would pay you $50,000 per year. Is each of the following elements an opportunity cost of accepting the new job at Brainiac, Inc.? Answer yes or no, and explain your answer.

   1. the increased time spent commuting to your new job

      No. The increased time spent commuting is a direct cost you will incur if you accept the new job.

   2. the $45,000 salary from your old job

      Yes. One of the benefits of the new job is that you will be making $50,000. But if you take the new job, you will have to give up your current job; that is, you have to give up your current salary of $45,000.

   3. the more spacious office at your new job

      No. A more spacious office is an additional benefit of your new job and does not involve forgoing something else, so it is not an opportunity cost.

4. Question

   Identify each of the following statements as positive or normative, and explain your answer.

   1. Society should take measures to prevent people from engaging in dangerous personal behavior.

      This is a normative statement because it stipulates what should be done. Your answer involves a value judgment. For example, should people be prevented from all dangerous personal behavior if they enjoy that behavior—like skydiving? Your answer will depend on your point of view.

   2. People who engage in dangerous personal behavior impose higher costs on society through higher medical costs.

      This is a positive statement because it is a description of fact.