EC201 Problem Sets, Fall 2020
A cell phone plan costs $50 per month for 1,000 minutes and $0.30 per minute for each additional minute after 1,000. What is the marginal fee for the 1,001st minute used?
$0.30
Jack and Jill work at a bakery. In 1 hour, Jack can decorate either five ice-cream cakes or two wedding cakes. In 1 hour, Jill can decorate either four ice-cream cakes or one wedding cake. Thus, the opportunity cost of decorating an ice-cream cake is _____ for Jack and _____ for Jill.
2/5 wedding cake; 1/4 wedding cake
Anita is a wonderful baker and can bake 10 cakes in a day, but then she has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John can make equally delicious cakes and cookies but can make only seven cakes or 100 cookies in a day. Based on this information, which of the following statements is TRUE?
John has the comparative advantage in the production of cakes
Which of the following explains why someone with an absolute advantage in painting houses may NOT spend their time painting houses?
She may be relatively better at something else than painting houses
The slope of the production possibilities frontier at a given point indicates ______.
a country's opportunity cost of production
Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as Y = 50 - 2X and tells us that the opportunity cost of catching (producing) an additional unit of fish in Iceland is:
constant in fish production
When markets don't align self-interest with social interest:
governments may improve the situation by changing incentives
It makes sense that Martha Stewart hires another person to do her ironing because:
her opportunity cost of ironing is higher than the opportunity cost for the person she hires
A producer has a comparative advantage over other producers if his production of the good involves:
lower opportunity cost
A person has a comparative advantage in activity X when that person's:
opportunity cost is lower for him than for other trading partners
The opportunity cost of a choice is:
the value of the opportunities lost