managerial economic midterm 1

managerial economic midterm 1 - 2 Tim and dawn are the...

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2) Tim and dawn are the theater watching the latest Oliver Stone film. Unfortunately, they both realize that neither one has enjoyed the movie thus far. Tim says to dawn, “we might as well stay, we already paid our six bucks each.” Dawn responds, ‘we should stay, but not because we paid six bucks each, but because we have nothing better to do.” Which statement makes more sense? Explain. The opportunity cost of using a resource for a given purpose is its value in its best alternative use. In this case, Dawn responds, ‘we should stay, but not because we said six bucks each, but because we have nothing better to do.” It statement makes more sense than Tim says to Dawn. Furthermore, the answer to this question depends on the opportunity cost of their time. Because, Tom and Dawn considered opportunity cost concern watched movie is the best alternative nothing to do. 3) A company recently raised the pay of employees by 20 percent. Employee productivity remained the same. The CEO of the company was quoted as saying, ‘it just goes to show that money does not motivate
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