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Unformatted text preview: C H A P T E R 1 1. The opportunity cost of the extra 10 points is the movie forgone when you stayed home to study. 3. The opportunity cost of going to school is $9,600 of goods and services. The opportunity cost of going to school this summer is the highestvalued activity that you will give up so that you can go to summer school. In going to summer school, you will forgo all the goods and services that you could have bought with the income from your summer job ($6,000) plus the expenditure on tuition ($2,000), text books ($200), and living expenses ($1,400). 5. No, parking at this mall is not free. Yes, you did impose a cost on Harry. Finding a parking space takes about 30 minutes, so you incur an opportunity cost when you park your car. The opportunity cost is the highestvalued activity that you forgo by spending 30 minutes parking your car. If you would have spent those 30 minutes studying, then the opportunity cost of parking at this mall is 30 minutes of studying. The cost that you imposed on Harry is the additional 30 minutes that Harry will have to spend searching for a parking space. A P P E N D I X T O C H A P T E R 1 1a. To make a timeseries graph, plot the year on the xaxis and the inflation rate on the yaxis. The graph will be a line joining all the points. 1b. (i) 1991 (ii) 1998 (iii) 1995, 1996, 1999, 2000 (iv) 1992, 1994, 1997, 1998, 2001 (v) 2000 (vi) 1992 1c. Inflation has had a fairly flat trend through these years. The line is close to horizontal. 3. To make a scatter diagram, plot the inflation rate on the x axis and the interest rate on the yaxis. The graph will be a set of dots. The pattern made by the dots tells us that as the inflation rate increases, the interest rate usually increases. 5a. To make a graph that shows the relationship between x and y , plot x on the xaxis and y on the yaxis. The rela tionship is positive because x and y move in the same direction: As x increases, y increases. 5b. The slope increases as x increases. Slope is equal to the change in y divided by the change in x as we move along the curve. When x increases from1 to 2 (a change of 1), y increases from 1 to 4 (a change of 3), so the slope is 3. But when x increases from 4 to 5 (a change of 1), y increases from 16 to 25 (a change of 9), so the slope is 9. 5c. The taller the building, the bigger is the cost of building it. The higher the unemployment rate, the higher is the crime rate. The longer the flight, the larger is the amount of fuel used. 7. The slope equals 8. The slope of the curve at the point where x is 4 is equal to the slope of the tangent to the curve at that point. Plot the points of the relationship and then draw a nice smooth curve through those points. Now draw the tangent line at the point where x is 4 and y is 16. Now calculate the slope of this tangent line. To do this, you must find another point on the tangent. The tangent line will cut the xaxis at 2, so another point is x equals 2 and y equals 0. Slope equals rise/run. The rise is 16 and the run is 2, so the slope is 8.rise/run....
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This note was uploaded on 05/21/2011 for the course ECON 110 taught by Professor Tan during the Spring '07 term at HKUST.
 Spring '07
 Tan
 Microeconomics, Opportunity Cost

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