1. Describe some of the trade-offs faced by each ofthe following:a. a family deciding whether to buy a new carb. a member of Congress deciding how muchto spend on national parksc. a company president deciding whether toopen a new factoryd. a professor deciding how much to preparefor classe. a recent college graduate deciding whetherto go to graduate school2. You are trying to decide whether to take avacation. Most of the costs of the vacation (airfare,hotel, and forgone wages) are measured indollars, but the benefits of the vacation are psychological.How can you compare the benefitsto the costs?3. You were planning to spend Saturday workingat your part-time job, but a friend asks you togo skiing. What is the true cost of going skiing?Now suppose you had been planning to spendthe day studying at the library. What is the costof going skiing in this case? Explain.4. You win $100 in a basketball pool. You havea choice between spending the money now orputting it away for a year in a bank accountthat pays 5 percent interest. What is the opportunitycost of spending the $100 now?5. The company that you manage has invested$5 million in developing a new product, but thedevelopment is not quite finished. At a recentmeeting, your salespeople report that the introductionof competing products has reducedthe expected sales of your new product to$3 million. If it would cost $1 million to finishdevelopment and make the product, shouldyou go ahead and do so? What is the most thatyou should pay to complete development?6. The Social Security system provides income forpeople over age 65. If a recipient of SocialSecurity decides to work and earn someincome, the amount he or she receives in SocialSecurity benefits is typically reduced.a. How does the provision of Social Securityaffect peoples incentive to save whileworking?b. How does the reduction in benefits associatedwith higher earnings affect peoplesincentive to work past age 65?7. A 1996 bill reforming the federal governmentsantipoverty programs limited many welfarerecipients to only two years of benefits.a. How does this change affect the incentivesfor working?b. How might this change represent a trade-offbetween equality and efficiency?8. Your roommate is a better cook than you are,but you can clean more quickly than yourroommate can. If your roommate did all thecooking and you did all the cleaning, wouldyour chores take you more or less time than ifyou divided each task evenly? Give a similarexample of how specialization and trade canmake two countries both better off.9. Explain whether each of the following governmentactivities is motivated by a concern aboutequality or a concern about efficiency. In thecase of efficiency, discuss the type of marketfailure involved.a. regulating cable TV pricesb. providing some poor people with vouchersthat can be used to buy foodc. prohibiting smoking in public placesd. breaking up Standard Oil (which onceowned 90 percent of all oil refineries) intoseveral smaller companiese. imposing higher personal income tax rateson people with higher incomesf. instituting laws against driving whileintoxicated10. Discuss each of the following statements fromthe standpoints of equality and efficiency.a. “Everyone in society should be guaranteedthe best healthcare possible.”b. “When workers are laid off, they should beable to collect unemployment benefits untilthey find a new job.”11. In what ways is your standard of living differentfrom that of your parents or grandparentswhen they were your age? Why have thesechanges occurred?12. Suppose Americans decide to save more oftheir incomes. If banks lend this extra saving tobusinesses, which use the funds to build newfactories, how might this lead to faster growthin productivity? Who do you suppose benefitsfrom the higher productivity? Is society gettinga free lunch?13. In 2010, President Barack Obama and Congressenacted a healthcare reform bill in the UnitedStates. Two goals of the bill were to providemore Americans with health insurance (via subsidiesfor lower-income households financedby taxes on higher-income households) andto reduce the cost of healthcare (via variousreforms in how healthcare is provided).a. How do these goals relate to equality andefficiency?b. How might healthcare reform increase productivityin the United States?c. How might healthcare reform decrease productivityin the United States?14. During the Revolutionary War, the Americancolonies could not raise enough tax revenueto fully fund the war effort; to make up thisdifference, the colonies decided to print moremoney. Printing money to cover expendituresis sometimes referred to as an “inflation tax.”Who do you think is being “taxed” when moremoney is printed? Why?15. Imagine that you are a policymaker trying todecide whether to reduce the rate of inflation.To make an intelligent decision, what wouldyou need to know about inflation, unemployment,and the trade-off between them?16. A policymaker is deciding how to finance theconstruc