ps2 answers - Ch13. 3. a. Since you would have to pay for...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Ch13. 3. a. Since you would have to pay for room and board whether you went to college or not, that portion of your college payment is not an opportunity cost. An even better answer would note that your room and board may be more expensive at college than it would be had you stayed at home, so the portion of the room and board that exceeds what it would have cost to live at home is an opportunity cost. b. The explicit opportunity cost is the cost of tuition and books (and maybe the room and board that exceeds the cost at home). c. An implicit opportunity cost is the cost of your time. You could work at a job for pay rather than attend college. The wages you give up represent an opportunity cost of attending college. 5. Here is the table of costs: Worker s Output Margina l Product Total Cost Average Total Cost Marginal Cost 0 0 --- $200 --- --- 1 20 20 300 $15.00 $5.00 2 50 30 400 8.00 3.33 3 90 40 500 5.56 2.50 4 120 30 600 5.00 3.33 5 140 20 700 5.00 5.00 6 150 10 800 5.33 10.00 7 155 5 900 5.81 20.00 a. See table for marginal product. Marginal product rises at first, then declines because of diminishing marginal product. b. See table for total cost. c. See table for average total cost. Average total cost is U-shaped. When quantity is low, average total cost declines as quantity rises; when quantity is high, average total cost rises as quantity rises. d. See table for marginal cost. Marginal cost is also U-shaped, but rises steeply as output increases. This is due to diminishing marginal product. e. When marginal product is rising, marginal cost is falling, and vice versa. f. When marginal cost is less than average total cost, average total cost is falling; the cost of the last unit produced pulls the average down. When
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
marginal cost is greater than average total cost, average total cost is rising; the cost of the last unit produced pushes the average up. 10
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/02/2009 for the course GEO 302C taught by Professor Yang during the Spring '08 term at University of Texas.

Page1 / 7

ps2 answers - Ch13. 3. a. Since you would have to pay for...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online