Homework 1-3

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: $6. $4. $0.25. $0.

$0.

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: a $250. b $175. c $75. d $0.

$75.

Twenty-five years ago, tofu was available only from small businesses operating in predominantly Asian sections of large cities. Today tofu has become popular as a high-protein health food and is widely available in supermarkets throughout the United States. At the same time, tofu production has evolved to become factory-based using modern food-processing technologies. Using the graph below, show how the tofu market has changed over the last 25 years.Instructions: Click on and drag one or both of the lines below to depict the changes in supply and/or demand in the tofu market. Given the information above, what does the demand-supply model predict about the change in the quantity of tofu sold in the United States over the last 25 years? The equilibrium quantity of tofu 1. _______________________ What does it predict about the change in the price of tofu in the United States? The equilibrium price 2. ________________________

1. will be higher now than 25 years ago 2. could be higher, lower or the same as 25 years ago

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. What is the opportunity cost to Dan of making a sandwich? 1/3 of a smoothie 3 smoothies 15 smoothies 5 smoothies

1/3 of a smoothie

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown in the accompanying table. Calculators Per Hour Computers Per Hour Smith 100 10 Jones 120 6 If Smith and Jones devote all of their resources to producing computers, then the maximum number of computers they can produce in an hour is: 120. 6. 16. 10

16.

Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant that gives free refills. According to the Cost-Benefit Principle Tim should: A. drink a third glass of soda. B. drink a third glass of soda if the extra benefit of doing so is positive. C. drink a third glass of soda if his total benefit from drinking soda is positive. D. not drink a third glass of soda.

B. drink a third glass of soda if the extra benefit of doing so is positive.

Suppose Martha and Julia both work at a bakery making bread and muffins. In an hour, Martha can either make 10 loaves of bread or 40 muffins, while Julia can either make 12 loaves of bread or 60 muffins. Both Martha and Julia work 8 hours a day. a. Draw Martha's daily PPC. Instructions: Use the tool provided to draw Martha's PPC curve. Plot only the endpoints and locate these endpoints on the axes of the diagram. b. Draw Julia's daily PPC. Instructions: Use the tool provided to draw Julia's PPC curve. Plot only the endpoints and locate these endpoints on the axes of the diagram. c. What is the opportunity cost to each of making one loaf of bread? Martha's opportunity cost of making a loaf of bread: muffins Julia's opportunity cost of making a loaf of bread: muffins d. What is the opportunity cost to each of making one muffin? Instructions: Enter your responses rounded to two decimal places. Martha's opportunity cost of making a muffin: loaves of bread Julia's opportunity cost of making a muffin: loaves of bread e. Who has the comparative advantage in making bread? multiple choice 1JuliaMarthaNeither f. Who has the absolute advantage in making bread? multiple choice 2JuliaNeitherMartha g. Suppose you are the owner of the bakery. If Julia and Martha are currently both spending all of their time making muffins, then which of them should you ask to start making bread? multiple choice 3Martha because her opportunity cost of making bread is lower than Julia's.Martha because her opportunity cost of making bread is higher than Julia's.Julia because her opportunity cost of making bread is lower than Martha's.Julia because her opportunity cost of making bread is higher than Martha's.

C) Martha's oppurtunity cost of making a leaf of bread is : 4 muffins. Julia's oppurtunity cost of making a leaf of bread is : 5 muffins. D) If Martha spends an hour making muffins, she gives up on 10 loaves of bread to get 40 muffins. So her opportunity cost of each muffin is 1/4 (= 10/40, or 0.25) of a loaf of bread. If Julia spends an hour making muffins, she gives up on 12 loaves of bread to get 60 muffins. So her opportunity cost of each muffin is 1/5 (= 12/60, or 0.20) of a loaf of bread. E) e. Martha has the comparative advantage in making bread because her opportunity cost is lower than Julia's. F) Julia has absolute advantage in making bread. G) Option c : Martha because her oppurtunity cost of making bread is lower than Julia's.

Kamryn is deciding between three potential activities on Saturday evening: 1) Staying at home and watching her favorite television show, an activity that she values at $18 and that entails no out-of-pocket costs. 2) Going to the movies with her sister to see the latest blockbuster action film, an activity she values at $30 and that entails $15 in out-of-pocket costs. 3) Going out to dinner with her best friend, an activity she values at $40 and that entails $23 in out-of-pocket costs. a) Which activity should Kamryn choose? multiple choiceGoing to the movies with her sisterGoing out to dinner with her best friendStaying at home and watching her favorite show b) What is Kamryn's opportunity cost of going to the movies? Instructions: If you are entering a negative number, be sure to include a negative sign (-). $ c) Relative to her next best alternative, what is Kamryn's economic surplus from going to the movies? Instructions: If you are entering a negative number, be sure to include a negative sign (-). $

a) Staying at home and watching her favorite show b) Kamryn's opportunity cost of going to the movies is the $15 in out-of-pocket expenses she would incur plus the value of her next best alternative, which in this case is the $18 in surplus she would get from staying home and watching television. Thus, her opportunity cost is $33 (= $15 + $18).33 c) Kamryn values going to the movies at $30, and we know from part b that her opportunity cost of going to the movies is $33. Thus, relative to her next best alternative, Kamryn's economic surplus from going to the movies is -$3 (= $30 - $33).-3

When a slice of pizza at the student union sold for $2, Moe did not purchase any. When the price fell to $1.75, Moe purchased a slice each day for lunch. Thus, we can infer that Moe's reservation price for a slice of pizza is: a) than $1.75. b) at least $1.75 but less than $2. c) exactly $1.75. d) exactly $2.00.

at least $1.75 but less than $2.

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the seller's surplus from this transaction was: a) $195 b) $10 c) $20 d) $215

b) $10

Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see: a) a decrease in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity. b) an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price. c) an increase in both the equilibrium price and quantity of bacon. d) an increase in the equilibrium price of bacon, but it's hard to say what will happen to the equilibrium quantity.

b) an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.

You are trying to decide whether to purchase the latest Harry Potter book online or borrow it from the library. There is no charge for borrowing a book from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13, then you should: a) borrow the book from the library because you can get it from the library for free. b) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13. c) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is greater than $13. d) buy the book online because it takes less time.

b) borrow the book from the library if the cost of doing so (in terms of the extra time it takes) is less than $13.

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause: a) Nepal's production possibilities curve to shift outward faster than the U.S.'s. b) The U.S.'s production possibilities curve to shift inward faster than Nepal's. c) The U.S.'s production possibilities curve to shift outward faster than Nepal's. d) Nepal's production possibilities curve to shift inward faster than the U.S.'s.

c) The U.S.'s production possibilities curve to shift outward faster than Nepal's.

In a free market, if the price of a good is below the equilibrium price, then; a)the government will set a higher price to reestablish the market equilibrium. b) sellers, dissatisfied with growing inventories, will raise their prices. c) buyers, hoping to ensure they acquire the good, will bid the price higher. d) sellers, dissatisfied with growing inventories, will lower their prices.

c) buyers, hoping to ensure they acquire the good, will bid the price higher.

Refer to the accompanying figure. At a price of $9, there will be: a) an excess demand of 5 units. b) an excess supply of 6 units. c) an excess demand of 1 unit. d) an excess supply of 5 units.

d) an excess supply of 5 units.

Refer to the accompanying figure. Moving from demand curve D2 to demand curve D1 could be caused by a(n): a) increase in the product's expected future price. b) increase in quantity supplied. c) increase in the price of a substitute. d) increase in the price of a complement.

d) increase in the price of a complement.

An implication of scarcity is that: a) people will never be happy. b) making trade-offs becomes c) unnecessary as wealth increases. d) some people will always be poor. e) people must make trade-offs

e) people must make trade-offs

You are the Minister of Trade for a small island country with the following annual PPC: As soon as you see the other island's PPC, you realize there are: a) no gains from trade because you both have the same comparative advantage. b) no gains from trade because there is no difference in your ability to harvest coconuts. c) no gains from trade because the other island has an absolute advantage. d) gains from trade because your island has a comparative advantage in coconuts.

gains from trade because your island has a comparative advantage in coconuts.

Refer to the accompanying figure. Suppose the solid line shows the demand for coffee. If coffee and tea are substitutes, and the price of tea falls, then you would expect: a) a decrease in the quantity of coffee demanded, but no shift in the demand curve. b) an increase in the quantity of coffee demanded, but no shift in the demand curve. c) the demand curve to shift to D(A). d) the demand curve to shift to D(B)

the demand curve to shift to D(A).

You can spend $10 for lunch and you would like to purchase two cheeseburgers. When you get to the restaurant, you find out the price for cheeseburger has increased from $5 to $6, so you decide to purchase just one cheeseburger. This is best described as: Multiple Choicethe a) substitution effect of a price change. b) the income effect of a price change. c) a decrease in the buyer's reservation price. d) an increase in the buyer's reservation price.

the income effect of a price change.

If there are no unexploited opportunities for individuals in a particular market, then one can conclude that: a) government regulation has been successful. b) the market is in equilibrium. c) the market is not in equilibrium. d) a socially optimal outcome has been achieved.

the market is in equilibrium.

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: a) attending State U. for four years is costless for Alex. b)Alex has no incentive to study hard while at State U. c) the opportunity cost of attending State U. includes the money Alex could have earned working for four years. d) the opportunity cost of attending State U. includes the sum of the benefits Alex would had from attending each of the other schools to which he was admitted.

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

The accompanying figure shows Becky's daily production possibilities curve for dresses and skirts. attainable. efficient. unattainable. inefficient.

unattainable.