Alan is a retired economist who enjoys building toy trains for his grandkids. He uses a workbench and tools from his garage, lumber he bought from the lumber store for $10, and varnish and paint he had left over from another project last year. Since a retired economist is always an economist, which of the following statements is he likely to make about building toy trains?
A) I'm not paying for any resources, so the toy trains I'm building are a good example of free goods.
B) I only paid $10 for the lumber, so the toy trains I'm building are a good example of free goods.
C) I'm using scarce resources to build the toy trains.
D) The resources I'm using to build the toy trains are not scarce.
E) If I had used lumber that I cut from the tree in my backyard instead of buying it from the store, then the toy trains I'm building would be a good example of free goods.

Question

Quizplus · Accepted Answer

The fact that Alan is using resources (lumber, tools, varnish, paint) to build toy trains implies that the resources he is using are not infinite, they are scarce. Therefore, building toy trains is an example of an economic activity that involves the use of scarce resources. Option A and B are incorrect because Alan had to pay $10 for the lumber, and using resources that are not paid for does not make them free goods. Option D is incorrect because Alan is using scarce resources. Option E is not relevant to the given information, and even if Alan had cut the lumber himself, it would still be a scarce resource that involves an opportunity cost.

Alan Is a Retired Economist Who Enjoys Building Toy Trains