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Unformatted text preview: 1 Solution First Principles 1. In each of the following situations, identify which of the nine principles is at work. a. You choose to shop at the local discount store rather than paying a higher price for the same merchandise at the local department store. b. On your spring vacation trip, your budget is limited to $35 a day. c. The student union provides a website on which departing students can sell items such as used books, appliances, and furniture rather than giving them away to their roommates as they formerly did. d. You decide how many cups of coffee to have when studying the night before an exam by considering how much more work you can do by having another cup ver- sus how jittery it will make you feel. e. There is limited lab space available to do the project required in Chemistry 101. The lab supervisor assigns lab time to each student based on when that student is able to come. f. You realize that you can graduate a semester early by forgoing a semester of study abroad. g. At the student union, there is a bulletin board on which people advertise used items for sale, such as bicycles. Once you have adjusted for differences in quality, all the bikes sell for about the same price. h. You are better at performing lab experiments, and your lab partner is better at writ- ing lab reports. So the two of you agree that you will do all the experiments, and she will write up all the reports. i. State governments mandate that it is illegal to drive without passing a driving exam. 1. a. People usually exploit opportunities to make themselves better off. In this case, you make yourself better off by buying merchandise at a lower price. b. Resources are scarce. Since you have only $35 a day, your resources are limited (scarce). c. Markets usually lead to efficiency. The market here is represented by the buyers and sellers who use the student union website to trade goods, in contrast to the “non- market” of simply giving items away to one’s roommate. The market is efficient be- cause it enables people who want to sell items to find those who want to buy those items. This is in contrast to a system in which items are simply left with a room- mate, who may have little or no desire to have them. d. “How much?” is a decision at the margin. Your decision is one of “how much” cof- fee to consume, and you evaluate the trade-off between keeping yourself awake and becoming more jittery from one more cup of coffee. e. Resources should be used as efficiently as possible to achieve society’s goals. Allo- cating scarce lab space according to when each student can use that space is effi- cient. f. The real cost of something is what you must give up to get it. The real cost of a se- mester abroad is giving up the opportunity to graduate early....
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This note was uploaded on 04/30/2008 for the course ECON 2106 taught by Professor Minjaesong during the Spring '06 term at Georgia Institute of Technology.
- Spring '06