1. Analyze whether each of the following is primarily a microeconomic or a macroeconomic issue:
i. Setting the price for a cup of coffee.
It is a microeconomic issue because the price set is for an individual good. The decision on setting the price is made by a firm.
ii. Measuring the impact of tax policies on total household spending in the economy.
It is a macroeconomic issue because it entails the whole economy. The issue entails measuring the behavior that affects the entire economy (McEachern, 2009).
iii. A household’s decision regarding whether or not to go on vacation.
It is a microeconomic issue because it entails a decision made by an individual household.
iv. A worker’s decision regarding which job to accept.
It is a microeconomic issue because it entails the decision made by an individual household. The worker represents the household and he/she makes a decision about the job.
v. Designing government policies to address issues with the social security program.
It is a macroeconomic issue because it entails the whole economy. The government policies concern the whole country.
2. Explain why each of the following is either a positive or a normative economic statement.
i. A 40-cent-per-pack tax on cigarettes will reduce teenage smoking by 10 percent.
This is a positive economic statement we can approve or disapprove it by reference to facts. The government can measure the demand of cigarettes when it taxes it by certain percentage. Measuring the demand of cigarettes by teenagers does not involve opinions of individuals.
ii. The federal government should spend more on diabetes research.
This is a normative economic statement because it describes an opinion of what the federal government feels it should spend on diabetes research. We cannot use references to facts to approve or disapprove the statement.
iii. Rising paper prices will increase book prices.
This is a positive economic statement because we can use the law of demand and supply to approve or disapprove it.
iv. The price of bagels at Bruegger’s is too high.
This is a normative economic statement because it reflects the opinion of an individual on what rate is too high. Similarly, there is no objective measure of when the price of bagels is high and when it is low.
3. Identify the effect of each of the following on the United States Production Possibilities Frontier (PPF). Does it shift inward, outward, or not at all? Briefly explain your answers.

i. A decrease in the average length of annual vacations.
The production possibility frontier will shift outwards. With the decrease in the average length of annual vacation, firms will produce more goods and services because of increased working hours. Besides, less vacation time means more production.
ii. An increase in immigration of foreign workers to the U.S.
The production possibility frontier will shift outwards. An increase in Immigration of foreign workers will increase the population of the country and this will result in a higher potential labor force (McEachern, 2009).
iii. An increase in the average retirement age.

The production possibility frontier will shift outwards. When the average retirement age increases, the labor force will increase because more people would still be working.
iv. The migration of skilled USA workers to Europe.

The production possibility frontier will shift inwards. When skilled workers migrate to Europe, the USA labor force will decrease and the economy will contract. Firms will suffer because they do not have their skilled workers (McEachern, 2009).
4. Identify whether each of the following would increase or decrease the opportunity costs for stay-at-home moms or dads (those who choose not to accept work outside the home). Briefly explain your answers.

a. Higher unemployment rates.
A higher unemployment rate would decrease the opportunity cost because moms or dads would find it hard to get a job and this would result to them settling for low wages. Similarly, their ability to work outside home is less than those who do not chose to work outside their homes.
b. Lower average wages.
With a lower average wages, the opportunity cost for moms or dads would decrease. This is because the wages they get are not enough to sustain them. They would prefer to stay at home and make more money because the amount of money they could earn outside is low.
c. Higher demand for labor.

A higher demand for labor would increase the opportunity cost for mom or dads. With higher demand, there would be job availability and this means that they would make more money.
d. Lower income tax rates on wages earned.

This would increase the opportunity cost. Imposing lower income taxes on wages means that moms or dads would have made more money if they chose to work outside their homes.

Reference
McEachern, W. A. (2009). Economics: A contemporary introduction. Mason, OH: South-Western Cengage Learning.