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econ1001_tutorial01

# econ1001_tutorial01 - Question 1 You can either watch a...

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Question 1 circle5 You can either watch a movie or babysitting. The benefit for you to watch movie is \$150 and the ticket cost is \$60. The benefit of babysitting is \$200 and the cost of it is \$40 (travelling cost, unpleasantness…) circle5 (i) what is the economic surplus of watching movie? Should you take this activity? circle5 (ii) what is the economic surplus of private tutoring? Should you take this activity?

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To calculate economic surplus of an activity circle5 (i) Economic surplus of watching movie = benefit – explicit cost – implicit cost = 150 – 60 (ticket fee) – value of babysitting = 150 – 60 – (200 – 40 ) = -\$70 circle5 You should not watch a movie ** Notice that the value of babysitting = benefit of babysitting – explicit cost of babysitting
To calculate economic surplus of an activity circle5 (ii) Economic surplus of babysitting = benefit – explicit cost – implicit cost = 200 – 40 (travelling cost and psychological cost) – value of watching movie = 200 – 40 – (150 - 60 ) = \$70 circle5 You should babysitting ** Notice that the value of watching movie = benefit of watching movie – explicit cost of watching movie

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econ1001_tutorial01 - Question 1 You can either watch a...

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