In both the case of the CPA painting her house and the painter filing his taxes, what is the determining factor that causes them to use professional services? What is the benefit of this specialization?
What will be an ideal response?
The opportunity cost of doing the job themselves is the deciding factor of what is the most economical for the CPA and the painter. It would cost $1500 (30 hr ? $50/hr) for the CPA to paint her own house, taking into account what she could have earned spending that time working as a CPA. However it only costs her $600 to hire the painter, even though he paints slower. The situation is similar for the painter, costing him $150 as an opportunity cost of filing his own taxes instead of working, compared to $100 for having the CPA do it. Looking at the outcome of the example, the clear benefit of specialization is a reduction of costs.
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Jobs lost to outsourcing can be partially offset by jobs gained from
A) increased output from another industry. B) greater trade imbalances. C) higher opportunity costs. D) higher production costs.
Refer to the above table. Which variables in the table are NOT autonomous?
A) planned consumption and planned saving B) planned saving only C) taxes, government spending, and saving D) planned investment, net exports, and government spending