Midterm 1 - practice questions - key

Midterm 1 - practice questions - key - Problems on...

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Problems on Economics and Economic Reasoning Chapter 1 in Colander’s Economics, Microeconomics, and Macroeconomics 1. a. The relevant costs are the marginal costs, or $12 a month. b. The economic decision rule (if MB>MC, do it; if MB<MC, don’t) will make the family as well off as possible. c. We need to know the marginal benefit of call waiting, voice mail, and caller-ID. d. The installation costs of the second line are sunk costs (costs that cannot be recovered). They do not enter into the decision. 2. a. Going to the concert does have a cost to you. The cost is the benefit you would have received from another activity, or opportunity cost. b. Since the tuition is nonrefundable, it is a sunk cost and therefore no longer represents opportunity costs. The true opportunities costs of continuing to take the course are the benefit of doing something else during class time. c. Deciding not to make decisions is still a decision. The opportunity cost of not considering choices is the benefit you would have gained from making those choices. d. How much you paid for the apples is a sunk cost, and therefore is not relevant to the decision. 3. a. Macroeconomics
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This note was uploaded on 06/01/2008 for the course MBAC 6010 taught by Professor Bonner during the Spring '08 term at Colorado.

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Midterm 1 - practice questions - key - Problems on...

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