Econ 1014 Exam 1 Study Guide

The epa when determining the economic benefit of

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9) The EPA, when determining the economic benefit of pollution control, estimates the number of lives saved by pollution control and multiplies that by the dollar value each life saved. Recently they proposed changing their formula so that the value of saving an older person’s life counted for less than the value of a younger person’s life saved. Which of the following would be valid economic justification for this change in how lives are valued? a. Older people have higher income than younger people, so saving their lives is more costly than saving the life of a young person b. Older people are more susceptible to pollution, so saving their lives is more costly than saving the life of a young person c. Older people have fewer years left to produce wealth for society, so their lives should be worth less than the lives of younger people d. All of the above are valid justifications for this policy change e. None of the above is a valid justification for this policy change 10) An economic explanation for your decision to attend college and your friend’s decision to skip college might be that: a. You’re smarter than your friends, which mean you don’t have to study as hard to pass your college courses, so your marginal cost of attending college is lower than your friend’s b. Your parent really want you to attend college and they will make you life miserable if don’t attend, while your friend’s parents don’t really care about him, so the cost of NOT attending college is higher for you than for your friend c. Your parents really want you to attend college so they are offering to buy you a Jaguar and send you on a trip to Europe as a college graduation gift, while your friends parents are only offering him a used Chevy Nova and a trip to Lake of the Ozarks as a college graduation gift, so your marginal benefit of attending college is higher than your friend d. A and C are possible explanation e. All of the above are possible explanation 11) Suppose you are planning a road trip with friends for the weekend. You’ll take a break from your job this weekend, leave Friday evening, drive to Chicago, stay at a nice hotel and attend a concert. You’ll drive back to Columbia Sunday night. you share the expense $10 for gas, $50 for the hotel, $50 for food and $50 for the concert. As an economist you know that you should not go on the trip unless: Unit 1 Section 6: How People Make Choices or Decisions
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