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ECON1 DISC1

# ECON1 DISC1 - #6 p.21 last second question 1 = 4 pts last...

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06/10/2010 20:00:00 Cost-Benefit Principle - take action if extra benefit >/ extra cost Ch. 1 #2 on page 20 Profit = revenue – cost (money you make – money you pay) \$0.30/lb tomatoes compost = \$0.50/lb

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Lbs compost Lbs tomatoes Revenue Cost 0 100 100 x 0.30 = \$30 0 1 120 120 x 0.30 = \$36 \$0.50 2 125 \$37.50 \$1 3 128 \$38.40 \$1.50 4 130 \$39.00 \$2 5 131 \$39.30 \$2.50
6 131.5 \$39.45 \$3

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Marginal  Benefit Marginal  Cost - - \$6 \$.50 \$1.50 \$.50 \$.90 \$.50 \$.60 \$.50 \$.30 \$.50

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\$.15 \$.50
Add 4 lbs compost because MB > MC but anything after that MB < MC Profit = 39 – 2 = \$37 #5 p. 21 Option 1: - buy \$200 of mushrooms - plant them - double - sell Option 2: - loan \$200 to Richard - Richard pays back \$200 + “interest” Option 1 pay off: \$200 EXTRA Option 2 pay off: interest has to be at least \$200 (or bigger than 100%) Opportunity cost of loaning \$200: \$200 in profit (can’t plant them!)

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Unformatted text preview: #6 p.21 last second question 1 = 4 pts last second question 2 = 10 pts OC of spending last second on Q2 = 4 pts MB = 10 pts MC = 4 pts MB > MC ANS: PUT MORE TIME IN #2. #1 = 48 pts #2 = 12 pts equal time spent on both useless info! Ch. 2 #2, p. 57 Ted: wax car in 20 mins, wash car in 60 mins Tom: wax car in 15 mins, wash car in 30 mins OC for Ted washing: 3 cars that he waxes OC of Tom washing: 2 cars that he waxes Who has comparative advantage of washing car? (lower OC!) Tom has it. Who has absolute advantage of washing car? (who’s better at washing it?) Tom has it. Who has comparative advantage of waxing car? Ted has it. Who has absolute advantage of waxing car? Tom has it. *See PPC in notebook...
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ECON1 DISC1 - #6 p.21 last second question 1 = 4 pts last...

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