Module 1 Eco

An economic naturalist is someone who:

applies economic insights to understand everyday life.

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is:

$0

Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:

the opportunity cost of attending State U. includes the money Alex could have earned working for four years.

You want to buy a TV that regularly costs $250. You can either buy the TV from a nearby store or from a store that's downtown. Relative to going to the nearby store, driving downtown involves additional time and gas. The downtown store, however, has a 10 percent off sale this week. Last week you drove downtown to save $20 on some concert tickets, a 15 percent savings. Should you drive downtown to buy the TV?

Yes, because you will save more than $20.

Over some fixed period of time in a market, Mo buys California rolls and Ahmed sells California rolls. The table below shows Mo's willingness-to-pay (WTP) and Ahmed's supply price for various units of California rolls for this period. unit 1 2 3 4 5 6 7 Mo's WTP. $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $.50 Ahmed's supply price $1.00 $1.10 $1.20 $1.30 $1.40 $1.50 $1.60 If a per unit tax of $1.50 is imposed on every unit of California rolls exchanged (the $1.50 is the total tax per unit), how many units of California rolls would you expect to be traded this period?

2

Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:

5

Refer back to the Manny and Su All-Mart question. Based upon the information given, which of the following is true: Manny (WTP) Su (WTP) Coffee cup $7.50 T-shirt $10.25 $3.60

If Manny experiences an endowment effect, we would need more information to determine whether he would be willing to trade his coffee cup for a t-shirt.

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 also 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, is one of them more likely than the other to go ahead and see the play anyway?

Martha and Sarah would make the same decision.

Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't cost him anything to visit. Is Curly correct?

No, because Curly could have used his frequent flyer miles to go somewhere else instead.

The Scarcity Principle applies to:

all decisions.

For each long-distance call anywhere in the continental United States, a new phone service will charge users $0.30 per minute for the first 2 minutes and $0.02 per minute for additional minutes in each call. Tom's current phone service charges $0.10 per minute for all calls, and his calls are never shorter than 7 minutes. If Tom's dorm switches to the new phone service, the average length of his calls would

increase

The Cost-Benefit Principle indicates that an action should be taken if:

its extra benefit is greater than or equal to its extra cost.

An implication of scarcity is that:

people must make trade-offs.

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is:

$1

Suppose the most you would be willing to pay to have 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?

$2.50

Suppose the most you would be willing to pay to have a freshly washed car before going out on a date is $8.00. The smallest amount for which you would be willing to wash someone else's car is $5.50. You are going out this evening and your car is dirty. How much economic surplus would you receive from washing it?

$2.50

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 weight 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 recover his opportunity cost of making the loan?

$200

Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:

$75

The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15. Number of Car Washes Per Month Total Monthly Benefit from Car Washes 0 $0 1 $20 2 $36 3 $48 4 $56 5 $60 How many times a month should you get your car washed?

2

Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why?

Other people are trying to choose the shortest line too.

Suppose that in the last few seconds you devoted to question 1 on your physics exam you earned 4 extra points, while in the last few seconds you devoted to question 2 you earned 10 extra points. You earned a total of 48 and 12 points, respectively, on the two questions, and the total 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?

Spend more time on question 2. You'll get more extra points on question 2 than you'll lose on question 1.

When Manny and Su were shopping at All-Mart, they were asked to complete a shopping satisfaction survey. For taking the survey, Manny was given an All-Mart coffee cup as a thank you gift, and Su received an All-Mart t-shirt. Some information on their respective willingness to pay for the two items (prior to completing the survey) can be found in the table below Manny (WTP) Su (WTP) Coffee cup $7.50 T-shirt $10.25 $3.60 Suppose that if Su had been given the coffee cup instead of the t-shirt, her surplus would have been $3.50 higher than when she receives the t-shirt. This information suggests that:

Su's WTP for the coffee cup is $7.10

The meal plan at University A lets students eat as much as they like for a fixed fee of $500 per semester. The average student there eats 250 pounds of food per semester. University B charges $500 for a book of meal tickets that entitles the student to eat 250 pounds of food per semester. If the student eats more than 250 pounds, he or she pays $2 for each additional pound; if the student eats less, he or she gets a $2 per pound refund. If students are rational, at which university will average food consumption be higher?

University A

You and your friend Joe have identical tastes. At 2 p.m., you go to the Ticketmaster outlet and buy a $30 nonrefundable ticket to a basketball game to be played that night in Syracuse, 50 miles north of your home in Ithaca. Joe plans to attend the same game, but because he cannot get to the Ticketmaster outlet, he plans to buy his ticket at the game. Tickets sold at the game cost only $25 because they carry no Ticketmaster surcharge. (Many people nonetheless pay the higher price at Ticketmaster, to be sure of getting good seats.) At 4 p.m., an unexpected snowstorm begins, making the prospect of the drive to Syracuse much less attractive than before (but ensuring the availability of good seats.) If both you and Joe are rational, is one of you more likely to attend the game than the other?

You are more likely to go to the game.

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:

an economic problem because Chris has only one hour, and engaging in one activity means giving up the other.

Residents of your city are charged a fixed weekly fee of $6 for garbage collection. They are allowed to put out as many cans as they wish. The average household disposes of three cans of garbage per week under this plan. Now suppose that your city changes to a "tag" system. Each can of garbage to be collected must have a tag affixed to it. The tags cost $2 each and are not reusable. What effect do you think the introduction of the tag system will have on the total quantity of garbage collected in your city? Under the "tag" system, the total quantity of garbage collected in the city will

decrease