HW+1 - (15 points) 3. Suppose you inherit $10,000 and...

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HW 1 Global Economy, Econ 13/IS 13 Due in class on Friday, October 8 th (Please make sure to write your TA name on your homework) 1. Ben decides to spend three hours working overtime on Friday evening rather than going to the bar with his friends. He earns $10 an hour. What is Ben’s opportunity cost of working overtime in this situation? (5 points) 2. Angelina can fix a meal in 1 hour, and her opportunity cost of one hour is $50. Brad can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is $20. Will both Angelina and Brad be better off if Brad fixes meals for her and she pays him $45 per meal? Explain.
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Unformatted text preview: (15 points) 3. Suppose you inherit $10,000 and decide to use the money to start a lawn-care business. You purchase a truck and a mower for $10,000 and start mowing lawns. Your annual cost for fuel and other supplies is $2,000. Now, instead of investing your money in the lawn-care business you could have invested the $10,000 in a bank account earning 8 percent annual interest. Additionally, you could have earned $30,000 in another job if you didnt start your own business. So what is your total annual cost (including opportunity cost) of operating your own lawn-care business? Explain. (20 points)...
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This note was uploaded on 11/23/2010 for the course ECONOMICS Econ 13 taught by Professor Georgesarraf during the Spring '10 term at UC Irvine.

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