If Ross decides to ride his bike this afternoon, he will miss his favorite television show, and he won't have time to study for his economics test. If Ross doesn't ride his bike, he'll choose to watch the television show instead. (He cannot both watch television and study for the test.) Ross's opportunity cost of riding the bike is
a. the value to Ross of watching the television show.
b. the value to Ross of studying for the test.
c. the value of watching the television show plus the value of studying for the test.
d. the value of watching the television show minus the value of studying for the test.
e. the value to Ross of riding his bike minus the value of watching the television show.
c. the value of watching the television show plus the value of studying for the test.
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Suppose bicycles are produced by a competitive constant-cost industry, which is initially in a long-run equilibrium. For each of the following situations, design a supply-demand diagram that shows how market price and quantity will be affected in both the short run and the long run. In your diagrams, show the short-run supply, long-run supply, and demand curves, along with any shifts in these curves. Label the initial long-run equilibrium E0, the new short-run equilibrium E1, and the new long-run equilibrium E2.
(i) New health regulations require each bicycle firm to purchase an air purification system to reduce hazardous fumes in the workplace. Who pays for this increased cost in the short run? Who pays in the long run? (ii) The cost of titanium alloy rises, which adds $10 to the cost of manufacturing each bicycle frame. Who pays for this increased cost in the short run? Who pays in the long run? (iii) Bicycling declines in popularity as more and more people take up in-line skating. How are the profits of bicycle manufacturers affected in the short run? How are their profits affected in the long run?
In the extreme case of a complete crowding-out effect
A) an increase in interest rates will stimulate investment spending. B) an increase in government spending will not increase aggregate demand. C) an increase in tax rates will stimulate work effort. D) an increase in government spending will stimulate investment spending.
You are the manager of a monopoly that faces a demand curve described by P = 63 ? 5Q. Your costs are C = 10 + 3Q. The revenue-maximizing output is:
A. 10/63. B. 6.3. C. 5. D. None of the answers is correct.
With a human capital investment (such as the investment in going to college), the most important cost tends to be
A) foregone leisure. B) books and equipment. C) the opportunity cost of not working. D) taxes.