ECON 213 Problem Set 1 Five Foundations of Economics solutions complete answers

ECON 213 Problem Set 1 Five Foundations of Economics solutions complete answers 

 

You are trying to decide whether to pay a house painter  $400 or do the work yourself. It would be rational to hire a house painter if

 

Emily attends a awards banquet where dinner is served. For her entrée, she has the option of steak, chicken, or vegetarian meal. If she chooses the vegetarian meal, then her opportunity cost is 

 

Nicole works as a ticket-taker at a local theater. Applying the circular flow model:

(a) The theater where Nicole works represents

(b) The movies that the theater shows represent

(c) The labor that Nicole provides to the theater represents

 

Emily attends a awards banquet where dinner is served. For her entrée, she has the option of steak, chicken, or vegetarian meal. If she chooses the vegetarian meal, then her opportunity cost is 

 

You have always thought that learning to play the guitar would be fun. However, this activity would cost money and require time away from other activities. This situation best exemplifies:

 

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $40 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $94 . 

 

Like a good economist, you calculated the opportunity cost of getting your college degree. Suppose that at your university, you will pay $12,000 each year for tuition, $2,000 each year for textbooks, and $8,000 per year for room and board. Before you left for college, your boss at your high-school job offered you a job paying $20,000 per year.

Assume that if you decided not to go to college, your parents would not let you live at home.

What is your opportunity cost for four years of college? 

 

Alexia spent 2 hours studying for an exam, and she received an A on the exam. Normally, she would have spent that time watching TV instead of studying. Alexia  figures she could have made a B after studying only 1 hours, but she really wanted an A. What is Alexia ’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

Although you are really tired after a long run, you are considering meeting a friend at the local track to run a few more miles. You will choose to keep running if

 

Think about your decision to buy the textbook for this course. You paid $250 for the book, but you would have been willing to pay $450 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $50 to you. The bookstore will pay you 50% of the original $250.

 

Sam has two options this weekend. He could work at his job and earn $7 per hour for three hours, or he could go to a sporting event for that three hours. A ticket for the event costs $30.

 

Suppose your friend can obtain concert tickets for $100 each, but you can’t get them for less than $300 each. Your friend sells the tickets to you for $200 each. Which of the five foundations of economics best describes the result of this activity?  

 

Sort the following incentives by whether they are positive or negative.

At Ultrinsic.com, students pay a small entry fee to compete in grades-based contests for cash prizes. Suppose that 30 students from your economics class each pay $30 to enter a grades-based contest. This would create a $900 prize pool. An equal share of the $900 pot is awarded at the end of the term to each contestant who earns an A in the course. If four students earn A’s, each receives $225. If only one student earns an A, that person gets the entire $900 pot. What economic concept does Ultrinsic.com use to encourage participants to learn more and get better grades?

 

Although you have an exam tomorrow, you are considering watching one more episode of your favorite TV show. You will choose to stay on the couch if

 

Max has two options this weekend. He could work at his job and earn $9 per hour for three hours, or he could go to a show at the theater for that three hours. A ticket for the event costs $30.

 

Buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold.

 

Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $400 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $50 to you. The bookstore will pay you 50% of the original $225.

 

How much total value have you gained? 

 

Consider the list of economic questions and issues below. Which are microeconomic issues, and which are macroeconomic issues?

 

Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25 per banana, but not a fourth banana. Which of the five foundations of economics best describes Marie’s thinking?    

 

Darshak spent 8 hours studying for an exam, and he received an A on the exam. Normally, he would have spent that time watching TV instead of studying. Darshak  figures he could have made a B after studying only 4 hours, but he really wanted an A. What is Darshak ’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

The opportunity cost of attending college is likely to be highest for a high school graduate 

 

Think about a country where most economic production results in a ground-shaking explosion  that cracks the foundations of buildings. What would be the trade-off if the bad result (a ground-shaking explosion) were reduced? 

 

You recently got a job as an usher at the nearby movie theater. Last night, you had the opportunity to work but decided to take your very first vacation day. Suppose you could have earned $11 per hour for three hours of work. Instead, you went to a movie yourself, where you spent $10 on a ticket and popcorn.  

 

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $35 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $104 .  

 

Suppose that a coffee lover values his first cup of coffee each morning at $6, but the second one is much less valuable. The local coffee shop allows a person who buys one cup of coffee to come back later that day and purchase a second cup of coffee for $1, which the coffee lover does. We would say the local coffee shop is using  to make additional sales, and the coffee lover is using  .

 

You have always thought that learning to skydive would be fun. However, this activity would cost money and require time away from other activities. This situation best exemplifies:  

 

For spring break, you have to decide between going on a cruise with friends and going on a service trip with Alternative Spring Break. You could also stay at home, work, and earn some extra money, but this would be less valuable to you than either experience. If you choose going on a cruise, what is your opportunity cost? 

 

You are trying to decide whether to pay a dog walker  $300 or do the work yourself. It would be rational to hire a dog walker if 

 

 

You are trying to decide whether to pay a dog walker  $100 or do the work yourself. It would be rational to hire a dog walker if

 

For spring break, you have to decide between attending a movie premiere in Los Angeles with friends and volunteering at the animal shelter. You could also stay at home, work, and earn some extra money, but this would be less valuable to you than either experience. If you choose attending a movie premiere in Los Angeles, what is your opportunity cost?

 

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $39 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $98 . 

How much total value was created from this trade? $

 

You recently got a job as an usher at the nearby movie theater. Last night, you had the opportunity to work but decided to take your very first vacation day. Suppose you could have earned $8 per hour for three hours of work. Instead, you went to a movie yourself, where you spent $12 on a ticket and popcorn.  

Your opportunity cost to see the movie was $

 

Think about a country where most economic production results in a ground-shaking explosion  that cracks the foundations of buildings. What would be the trade-off if the bad result (a ground-shaking explosion) were reduced?

 

Matias spent 10 hours studying for an exam, and he received an A on the exam. Normally, he would have spent that time watching TV instead of studying. Matias  figures he could have made a B after studying only 5 hours, but he really wanted an A. What is Matias ’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

Carlos has two options this weekend. He could work at his job and earn $10 per hour for three hours, or he could go to a show at the theater for that three hours. A ticket for the event costs $30.

What is the opportunity cost of the event?  

 

At Ultrinsic.com, students pay a small entry fee to compete in grades-based contests for cash prizes. Suppose that 10 students from your economics class each pay $70 to enter a grades-based contest. This would create a $700 prize pool. An equal share of the $700 pot is awarded at the end of the term to each contestant who earns an A in the course. If four students earn A’s, each receives $175. If only one student earns an A, that person gets the entire $700 pot. What economic concept does Ultrinsic.com use to encourage participants to learn more and get better grades?

 

You are trying to decide whether to pay a housekeeper  $200 or do the work yourself. It would be rational to hire a housekeeper if

 

You have always thought that learning to skydive would be fun. However, this activity would cost money and require time away from other activities. This is an example of

 

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold.

Think about your decision to buy the textbook for this course. You paid $250 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $90 to you. The bookstore will pay you 50% of the original $250.

How much total value have you gained?

 

Sam has two options this weekend. He could work at his job and earn $8 per hour for three hours, or he could go to a show at the theater for that three hours. A ticket for the event costs $30. What is the opportunity cost of the event?

 

You are trying to decide whether to pay movers  $200 or do the work yourself. It would be rational to hire movers if

 

For spring break, you have to decide between attending a movie premiere in Los Angeles with friends and training for a marathon. You could also stay at home, work, and earn some extra money, but this would be less valuable to you than either experience. If you choose attending a movie premiere in Los Angeles, what is your opportunity cost?

 

You have always thought that hiking in the Rocky Mountains would be fun. However, this activity would cost money and require time away from other activities. This is an example of

 

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $21 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $100 .  How much total value was created from this trade? 

 

You recently got a job as an usher at the nearby movie theater. Last night, you had the opportunity to work but decided to take your very first vacation day. Suppose you could have earned $10 per hour for three hours of work. Instead, you went to a movie yourself, where you spent $11 on a ticket and popcorn.  Your opportunity cost to see the movie was   

 

James spent 10 hours studying for an exam, and he received an A on the exam. Normally, he would have spent that time watching TV instead of studying. James  figures he could have made a B after studying only 5 hours, but he really wanted an A. What is James ’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25 per banana, but not a fourth banana. Which of the five foundations of economics, illustrated above, best describes Marie’s thinking?  

 

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold. Think about your decision to buy the textbook for this course. You paid $200 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $90 to you. The bookstore will pay you 50% of the original $200. How much total value have you gained? $

 

Carlos has two options this weekend. He could work at his job and earn $8 per hour for three hours, or he could go to a concert for that three hours. A ticket for the event costs $30.

What is the opportunity cost of the event?

 

In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold. Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $50 to you. The bookstore will pay you 50% of the original $225. How much total value have you gained? 

 

James spent 8 hours studying for an exam, and he received an A on the exam. Normally, he would have spent that time watching TV instead of studying. James figures he could have made a B after studying only 4 hours, but he really wanted an A. What is James’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $42 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $91. How much total value was created from this trade?   

 

You have always thought that learning to scuba dive would be fun. However, this activity would cost money and require time away from other activities. This is an example of

 

For spring break, you have to decide between going on a cruise with friends and going on a service trip with Alternative Spring Break. You could also stay at home, work, and earn some extra money, but this would be less valuable to you than either experience. If you choose going on a cruise, what is your opportunity cost?

 

You are trying to decide whether to pay a lawn-mowing service $300 or do the work yourself. It would be rational to hire a lawn-mowing service if

 

01Question

Sort the following incentives by whether they are positive or negative.

 

-A reward offered for the return of a lost item
-Your instructor offers extra credit for attending an event outside of class
-The government offers a tax credit for donating to recognized charities
-The government taxes the sale of cigarettes
-A parking ticket given for parking in a no-parking zone
-Your instructor institutes an attendance policy that drops your grade if you miss more than two classes

 

02Question
At Ultrinsic.com, students pay a small entry fee to compete in grades-based contests for cash prizes. Suppose that 10 students from your economics class each pay $80 to enter a grades-based contest. This would create a $800 prize pool. An equal share of the $800 pot is awarded at the end of the term to each contestant who earns an A in the course. If four students earn A’s, each receives $200. If only one student earns an A, that person gets the entire $800 pot. What economic concept does Ultrinsic.com use to encourage participants to learn more and get better grades?

 

03Question
Although you have an exam tomorrow, you are considering watching one more episode of your favorite TV show. You will choose to stay on the couch if

 

04Question
Malik has two options this weekend. He could work at his job and earn $9 per hour for three hours, or he could go to an exhibit at the art museum for that three hours. A ticket for the event costs $30.

What is the opportunity cost of the event? 

 

05Question
In Chapter 1, you learned that buying and selling textbooks are two separate decisions made at the margin. Textbooks create value both when they are bought and when they are sold.

Think about your decision to buy the textbook for this course. You paid $225 for the book, but you would have been willing to pay $500 to use the book for the semester. Suppose that at the end of the semester you could keep your textbook or sell it back to the bookstore. Once you have completed the course, the book is worth only $50 to you. The bookstore will pay you 50% of the original $225.

How much total value have you gained? $

 

06Question
Consider the list of economic questions and issues below. Which are microeconomic issues, and which are macroeconomic issues?
Place each item in the correct column.

·         Which company’s stocks should your mother buy?

·         Why does the price of gasoline increase during the summer?

·         Why do economics majors earn more than marketing majors?

·         How does Apple decide how many iPads to produce?

·         Should the government pass a jobs bill to stimulate the economy?

·         What happens to prices when the government increases the money supply?

·         How much will the economy grow next year?

·         Why does the unemployment rate increase during a recession?

 

07Question
Suppose that Marie is buying bananas. She decides that she would like to purchase three bananas at the price of $0.25 per banana, but not a fourth banana. Which of the five foundations of economics, illustrated above, best describes Marie’s thinking?  

 

08Question
James spent 8 hours studying for an exam, and he received an A on the exam. Normally, he would have spent that time watching TV instead of studying. James  figures he could have made a B after studying only 4 hours, but he really wanted an A. What is James ’s marginal cost in terms of TV viewing to move from a B to an A on the exam?

 

09Question
The opportunity cost of attending college is likely to be highest for a high school graduate

 

10Question
Think about a country where most economic production results in loud construction noise that gives people headaches. What would be the trade-off if the bad result (loud construction noise) were reduced?

 

11Question
You recently got a job as an usher at the nearby movie theater. Last night, you had the opportunity to work but decided to take your very first vacation day. Suppose you could have earned $8 per hour for three hours of work. Instead, you went to a movie yourself, where you spent $13 on a ticket and popcorn.  

Your opportunity cost to see the movie was

 

12Question
Suppose you own a bicycle but haven't found the time to ride it much lately. These days, it is only worth $42 to you. One of your close friends, who recently got a job at the college bookstore two miles down the road, wants to take it off your hands. He offers you $70 for the bicycle, and you gladly accept. Your friend is also happy because he thinks the bicycle is worth $91. 

How much total value was created from this trade?

 

13Question
Suppose that a coffee lover values his first cup of coffee each morning at $6, but the second one is much less valuable. The local coffee shop allows a person who buys one cup of coffee to come back later that day and purchase a second cup of coffee for $1, which the coffee lover does. We would say the local coffee shop is using       to make additional sales, and the coffee lover is using    .

 

14Question
You have always thought that learning to scuba dive would be fun. However, this activity would cost money and require time away from other activities. This is an example of

 

15Question
For spring break, you have to decide between going on a cruise with friends and going on a service trip with Alternative Spring Break. You could also stay at home, work, and earn some extra money, but this would be less valuable to you than either experience. If you choose going on a cruise, what is your opportunity cost?

 

16Question
You are trying to decide whether to pay a lawn-mowing service $300 or do the work yourself. It would be rational to hire a lawn-mowing service if

 

At Ultrinsic.com, students pay a small entry fee to compete in grades-based contests for cash prizes. Suppose that 25 students from your economics class each pay $40 to enter a grades-based contest. This would create a $1000 prize pool. An equal share of the $1000 pot is awarded at the end of the term to each contestant who earns an A in the course. If four students earn A’s, each receives $250. If only one student earns an A, that person gets the entire $1000 pot. What economic concept does Ultrinsic.com use to encourage participants to learn more and get better grades?