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
x
axis
and the inflation rate on the
y
axis. 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
y
axis. 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
x
axis and
y
on the
y
axis. 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
x
axis 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.