hw ch 1 1-15 - Econ 203 Principles of Microeconomics Course...

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Econ 203 – Principles of Microeconomics Course No. 26508D, Fall 2005 Pg. 13-14 #1-15 1. When the phrase “Buy 2, get 1 free” is used, it is not necessarily free to society. This is so because of the resources used to produce the product. These resources include land, equipment, labor, and so forth. 2. Utility ultimately means pleasure, happiness or satisfaction. When people want to increase their utility, they want to maximize their well-being. This relates to economic perspective when people make choices, usually rational choices. A person’s rational choice varies in each situation and is based on maximizing a person’s satisfaction (utility). 3. Three examples of recent decisions I made where I weighed marginal costs and benefits: a. Ex. 1: My decision to attend USC. I was debating between attending USC and BC. I figured out the benefits/costs of attending USC and the benefits/costs of attending BC. Ultimately, since I am here now, I chose USC. The benefits far exceeded the costs, whereas there were more costs when attending BC, for example location and reputation of each business school. b. Ex. 2: I personally wanted to purchase expensive sunglasses and I had to make the decision not to. The marginal costs outweighed the benefits. Since the benefit did not exceed the cost, I chose not to buy these sunglasses. c. Ex. 3: Studying in the library and not my dorm. Not wanting to become a procrastinator, I wanted to get “on top” of all my homework. I figured that I would have many more distractions in my dorm versus the distractions that I may or may not have in the library. Ultimately, I made a great decision because I got more done in that hour or so that I could have done in a few hours in my dorm. There are far too many interruptions in a dorm than in the library. 4. Someone who usually eats lightly at a restaurant may become suddenly eats voraciously at a buffet because the benefits > costs. For instance, at a restaurant, the price for a small side salad may be the same exact cost for all you can eat at the Hometown Buffet. The consumer then gains more benefits with zero cost. 5. The scientific method is basically the process of investigation of a hypothesis. Included in the scientific method is an observation, hypothesis, testing of the hypothesis and modification of the hypothesis, and ultimately, continued testing to accumulate enough information and data to possibly develop a theory or principle. The scientific method directly correlates with theoretical economics.
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