Chapter 1

Chapter 1 - 1. A. B. C. D. Which of the following is not in...

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1. Which of the following is not in line with the thinking of economists? A. Clean air is not free. B. In wealthy societies there is plenty of everything to go around. C. High tolls reduce congestion on the highway. D. There would be fewer chickens if eating chicken were made illegal. 2. Your cousin gives you a $150 gift certificate for the BU Bookstore, but you are required to buy $600 worth of books for your classes. The economics textbook alone costs $150. Which of the following statements is true. A. If you use the certificate for your economics textbook, then its opportunity cost is zero. B. If you use the certificate for the economics textbook, then its opportunity cost is $150. C. If you use the certificate for the economics textbook, then its opportunity cost is $450. D. If you use the certificate to buy romantic novels (not required), then those novels have a zero opportunity cost. If you don't use the gift certificate for the economics textbook, then you could save $150 on other books that you have to buy. So when you use the gift certificate for the economics textbook, its opportunity cost is $150. You are thinking of going to college. Tuition and fees per year are as follows: Tuition $33,000 Housing $7,000 Food $3,000 Other $2,000 3.1. If you don't attend college, you could live and eat at home for free and earn $12,000 per year working at McDonald's. Then the opportunity cost to you of a year in college is A. $45,000 B. $12,000 C. $57,000 D. $47,000 This question is about the concept of OPPORTUNITY COST. a) According with the material presented in class, the opportunity cost is the $-value of the greatest foregone benefit. This would be $12,000 in our example. b) According with the textbook, the opportunity cost includes out-of-pocket spending plus the $- value of the greatest foregone benefit If you live at home, you would have net earnings of $12,000. But if you go to college, you would lose the $12,000 and have $45,000 in college expenses, which adds up to $57,000. For this reason, both answers A) and B) are correct. 3.2. If you don't go to college, you will not be able to get a job, but your parents will let you live and eat at home for free. The opportunity cost to you of a year in college is A. $57,000 B. $47,000 C. $0 D. $45,000 This question is about the concept of OPPORTUNITY COST. a) According with the material presented in class, the opportunity cost is the $-value of the greatest foregone benefit. This would be $0 in our example. b) According with the textbook, the opportunity cost includes out-of-pocket spending plus the $- value of the greatest foregone benefit. If you live at home, you would have $0 net earning. But if you go to college, you would have $45,000 For this reason, both answers C) and D) are correct.
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3.3. Now your mother tells you that if you don't go to college, she won't let you live at home. Therefore, if you don't go to college, expenses for housing and food would be the
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Chapter 1 - 1. A. B. C. D. Which of the following is not in...

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