Concepts: Uncertainty, Investment In Physical Capital
Background: Uncertainty is an important but complex concept that potentially severely affects economic outcomes. In the context of Club de Cuervos, the passing of Salvador Iglesias Sr. created uncertainty about the future of the local soccer team, and rumors of the club being relocated had emerged.
Question: Explain why and how the uncertainty created by the passing of Salvador Iglesias Sr. affects the club itself, but also the local economy of Nuevo Toledo.
Concepts: Investment in human capital, Monetary and non-monetary costs, Risky investment, Nominal exchange rate.
Background: Polina is addicted to alcohol and just finished a rehabilitation program in a facility. Lyonya, her dad, is picking her up to bring her home.
Question 1: Define what an investment in human capital is. Provide two examples of human capital investment.
Question 2: Why do economists consider rehab an investment in human capital? Why some believe that rehab a risky investment?
Question 3: What costs are involved when somebody checks into a rehabilitation program?
Question 4 (Let’s use data): Lyonya has to pay 52,902 Russian Rubles to cover Polina’s damages in the rehab facility. Compute the US dollar cost Lyonya had to pay to cover Polina’s damages (https://www.xe.com/ ).
Concepts: Human capital, opportunity cost, fiscal policy, fiscal multiplier
Background: William is excited to go to school. However, he learns that his father, Trywell, is struggling with school fee payments.
Question 1: Which factor of production is William contributing to? Use the Solow model and its production function to explain the relationship between this factor of production and the country’s output.
Question 2: Trywell tries to save money for school tuition. What is the opportunity cost of sending William to school?
Question 3: Should the Malawian government pay all pupils’ school fees? Using the fiscal multiplier, explain why some countries spend money on education programs.
Concepts: Human Capital, Technological Knowledge, Productivity.
Background: Prof. Lorenz says to her students that what is in the textbook is irrelevant because the included information is already outdated and that they should focus on finding new solutions.
Question: Which two determinants of productivity do you develop when studying at the university? Which other factors of production is Prof. Lorenz trying to improve by requiring students to focus on new solutions?
Concepts: Debt financing, equity financing, bond, stock, human capital
Background: Starting a company is costly. Both Hakan and Memo are poor in the series and do not have the necessary funding to create their company. To find the money, Hakan tries to get a well-paid job at a large firm.
Question 1: What are Hakan and Memo’s financing options to make the initial investment?
Question 2: What would Hakan need to increase his chances of getting such a job?
Concepts: Investment in human capital, net present value.
Background: Carlos and Danilo are young teenagers and it is time for them to make study choices. They could continue with school or try to become professional soccer players by joining a development academy. First, Carlos and Danilo, and then Adrianna and Segundo discuss that choice considering potential future outcomes and how both options are mutually exclusive.
Question: Explain how economists think about making education decisions. Apply this decision-making to Carlos and Danilo’s situation and explain why they both prefer investing in soccer development instead of continuing school.
