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Tutorials_Weeks_02%2D08

# Tutorials_Weeks_02%2D08 - ECONOMICS 1101 MICROECONOMICS 1...

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ECONOMICS 1101 - MICROECONOMICS 1 Semester 1, 2008 Tutorial 1, Week 2 _____________________________________________________________________ 1. Draw on the concepts of scarcity, opportunity cost and the cost-benefit principle to discuss how someone who had studied some economics might think about the following. a. How much time to spend preparing for each week’s tutorial. b. How many times to go to the gym in a year when you’ve already paid an annual gym fee of \$500. c. How many times to go to the gym a year when it costs \$10 a session. d. Whether to invest in a personal trainer or not. 2. To earn extra money in the summer, you grow tomatoes and sell them at the farmers’ market for \$3 per kilogram. By adding compost to your garden, you can increase your yield as shown in the table below. Bags of compost Kg of tomatoes 0 100 1 120 2 125 3 128 4 130 5 131 6 131.5 a. Plot the relationship between bags of compost and kilograms of tomatoes. Which variable will you put on the y-axis and why? What happens to the slope as the tomato yield increases? Express how this affects the relationship between bags of compost and tomatoes in a single sentence? b. If compost costs \$5 per bag and your goal is to make as much profit as possible, how many bags of compost should you add? 3. Miriam has the following marginal benefit schedule for litres of wine: Quantity (litres) Marginal Benefit (\$) 0 20 1 16 2 12 3 8 4 4 5 0 a. Use the cost-benefit principle and the table to explain how many litres of wine Miriam should consume when the price of wine is \$10 and wine can only be bought in one litre bottles. b. Sketch her marginal benefit (MB) curve with MB on the y-axis. c. Calculate the slope and find the equation of this line. d. Use the equation to explain how many litres Miriam should consume when the price of wine is \$10 a litre and wine can also be bought in half litre bottles. Illustrate your answer.

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