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ARE100A INTERMEDIATE MICROECONOMICS: THEORY OF PRODUCTION AND CONSUMPTION FALL QUARTER 2009 Problem Set 7 Answers Thursday November 5 1. “Free” tickets, but you must answer 100 questions. Why are the tickets not free? Your time is worth something. So the opportunity cost of the ticket is the time, plus the chance they will sell your email address and you will be bothered. 2. Li lives in a house of her grandmother. What should Li say to explain economic costs to grandmother? What data does Li need to determine the economic cost of the house? The cost is the net rent granny can get from other tenants who will also keep up the house. Li needs data on the market rent for similar houses. Granny will still rent to Li and to pay tuition for her economics classes because she is proud of her clever and honest granddaughter. 3. Annual total cost: C = P k K + 10Q 2 , where K, the quantity of trucks, is 20 and P k , the annual ownership cost of per truck is $2,000. The fleet of trucks is fixed. a. Total costs, AC and MC for Q = 100?
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