Chap 1 problem set August 2016 Xu Microecon GCSU

Tom is a mushroom farmer. He invests all his spare cash in additional mushrooms, which grow on otherwise useless land behind his barn. The mushrooms double in size during their first year, after which time they are harvested and sold at a constant price per pound. Tom's friend Dick asks Tom for a loan of $200, which he promises to repay after 1 year. How much interest will Dick have to pay Tom in order for Tom to be no worse off than if he had not made the loan?

If Tom kept the $200 and invested it in additional mushrooms, at the end of a year's time he would have an additional $400 worth of mushrooms to sell. Dick must therefore give Tom $400

Martha and Sarah have the same preferences and incomes. Just as Martha arrived at the theater to see a play, she discovered that she had lost the $10 ticket she had purchased earlier. Sarah just arrived at the theater planning to buy a ticket to see the same play when she discovered that she had lost a $10 bill from her wallet. If both Martha and Sarah are rational and both still have enough money to pay for a ticket, which one of the following statements is correct?

Martha and Sarah should make the same move They both share some similarities Same preference Same income Same sunk cost They should both see the movie if the benefit>cost

1. The most you would be willing to pay for having a freshly washed car before going out on a date is $6. The smallest amount for which you would be willing to wash someone else's car is $3.50. You are going out this evening, and your car is dirty. How much economic surplus would you receive from washing it?

The economic surplus from washing your dirty car is the benefit you receive from doing so ($6) minus your cost of doing the job ($3.50), or $2.50.

Suppose that in the last few seconds you devote to question 1 on your physics test you earned 4 extra points, while in the last few seconds you devote to question 2 you earned 10 extra points. You earned a total of 48 and 12 points, respectively, on the two questions and the time you spent on each was the same. If you could take the exam again, how—if at all—should you reallocate your time between these questions?

You should have spent more time on question 2. This added 6 more points to your score

To earn extra money in the summer, you grow tomatoes and sell them at the farmers' market for 30 cents per pound. By adding compost to your garden, you can increase your yield as shown in the table below. If compost costs 50 cents per pound and your goal is to make as much money as possible, how many pounds of compost should you add?

http://webs.wofford.edu/mcarthurjr/ECO_201/e201s9p1a.pdf The benefit of adding a pound of compost is the extra revenue you'll get from the extra tomatoes that result. The cost of adding a pound of compost is 50 cents. By adding the fourth pound of compost you'll get 2 extra pounds of tomatoes, or 60 cents in extra revenue, which more than covers the 50-cent cost of the extra pound of compost. But adding the fifth pound of compost gives only 1 extra pound of tomatoes, so the corresponding revenue increase (30 cents) is less than the cost of the compost. You should add 4 pounds of compost and no more.