Opportunity Cost of Macroeconomic and Microeconomics Events
1. The Wacky Widget Factory, a firm, decides to produce 5,000 gadgets instead of 10,000 widgets.
* This event is a microeconomic issue. The key words are a firm and how it interacts in markets.
* There may or may not be an opportunity cost depending upon the demand for the gadget. If there is less demand for the gadget, there may not be opportunity cost. Otherwise the firm has an opportunity cost of 5000 gadgets.
2. The U.S. government reduces funding for the Environmental Protection Agency, an agency in charge of regulating and monitoring the level of all pollution in the U.S., by $250 billion to reduce taxes on the wealthiest Americans.
* This event is a macroeconomic issue because it involves government intervention.
* There is an opportunity cost which society has to suffer environmental pollution, again reduction of tax on the wealthiest increases the gap between the rich and the poor and inequality increases.
3. A state reduces taxes on large businesses that move their production to their state and pays for it by raising taxes on existing residents.
* This event is a macroeconomic issue because it affects the state.
* Cost benefit analysis should be made if the residents of the state are going to derive benefits from these large businesses, the cost is no problem at all.
4. Local public education funding is reduced and reallocated to improve streets and other infrastructure to attract new business.
* This event is a macroeconomic issue since it is studying economic growth.
* The opportunity cost depends on the availability of new business. The social cost incurred due to the reduction in local public education funding and social benefit from the opening of the new business should be taken into account. A cost-benefit analysis of these activities must be made. Even though the capital foundation is come to halt, physical capital is created by...