assignment 1 Solutions

# assignment 1 Solutions - University of Victoria Economics...

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University of Victoria September 17, 2010 Economics 203 Assignment #1 Solutions Due: Monday, October 4 , 2010 , @ 12 noon. (In the boxes marked A ECON 203" near the Economics Department Office) Show all your work. Put your LAB section on your assignment . Questions from Chapter 1: 1) Review #5, page 25. ( 2 marks ) 2) Problems 1 ( 3 marks ), 7 ( 2 marks ), 11 ( 3 marks ), and 12 ( 3 marks ), page 26- 27. Questions from Chapter 2 : 1) Review #1 ( 2 Marks ) and #5 (4 marks), page 53. 2) Problems 12 ( 5 marks ) and 18 ( 3 marks ), pages 55-56. Question from Chapter 3: 1) Review #4, page 87 ( 1 mark ). 2) Problem 1 ( 2 marks ) and 16 ( 5 marks ), page 88-89. Total marks: 35

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Solutions: Chapter 1 1) Review 5: Why should sunk costs be irrelevant for current decisions? (2 marks) By definition , a sunk cost is a cost that is incurred regardless of one's current decisions. 2) Problems 1, 7, 11, 12. Problem 1 : (3 marks) Let \$X be the amount Jamal earns in a day on his job. The cost to Jamal of going to the park is then \$15 (admission fee) + \$5 (gas & parking) + \$10 (the lost satisfaction from not working) + \$X (lost salary) = \$30 + \$X. The benefit of going to the park is \$45. He should go to the park if his salary is \$10/day, and shouldn't go if his salary is \$20/day. At a salary of \$15/day, he is indifferent between going and not going. If income is \$10
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assignment 1 Solutions - University of Victoria Economics...

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