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Unformatted text preview: ECON 256: Intermediate Microeconomics Short Assignment: 2 1 Answer Key Due Date: Tuesday, September 14, 2010 1. Bob has decided to go skiing for the weekend, but (absentminded professor that he is) he has forgotten his skis. He is considering three options: (1) stay indoors and read books on economics; (2) ski for two days and read economics one day; (3) ski for three days and forget economics. The costs of skiing are as follows: Transportation $100 Lodging $200 Ski pass $ 20 per day Ski rental $ 25 per day Bob has also found out that the resort has a special three-day pass including ski rental for $75. Assume that Bob has already reached the ski slopes and that he cannot cancel his room reservations. (a) What are the costs of the three options listed above? First of all, note that transportation and lodging represent sunk costs. The opportunity cost of option one is giving up skiing in order to read economics. Option two costs $75 since the three-day pass is cheaper than the per day rate for two days; in addition Bob gives up two days of studying...
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This note was uploaded on 03/27/2011 for the course ECON 256 taught by Professor ?? during the Fall '05 term at Bucknell.
- Fall '05