Suppose you plan to go to school this summer. The cost of tuition and textbooks is $1,400 and housing, board, and entertainment will cost you $500
If you didn't go to school, you'd live in your parents' house for free, but your other living expenses would be about the same. Also, if you didn't go to school you'd work full time and could earn $8,000. You can still work part time while attending the summer school, but you will earn only $3,000. a) What will the summer school cost you in terms of money explicitly paid? b) What are the opportunity costs of going to summer school that you don't pay explicitly? Explain. c) What is your total opportunity costs of going to school this summer? Explain your answer.
a) You explicitly pay the cost of tuition and textbooks ($1,400 ) and the cost of housing ($500 ), so your total explicit costs are $1,900.
b) Your opportunity cost is what your give up to go to summer school. You forego a fulltime job, at which you would earn $8,000, in exchange for a part-time job, where you earn $3,000, which means you give up $5,000. Although you don't pay this money explicitly, you lose the opportunity to earn it and so it's an opportunity cost of attending summer school.
c) First, your opportunity cost includes the cost that you pay explicitly ($1,900 ), which you have to pay only if you go to school. If you decide not to go to school, you can use this money to buy something else—an opportunity you are giving up. Second, as explained in the previous part, you are also giving up $5,000, although not paying this money explicitly. So your full opportunity cost of going to school is $1,900 + $5,000 = $6,900.
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A) below; surplus B) equal to; shortage C) above; surplus D) above; shortage E) below; shortage
Two countries, A and B, produce Good X. Which of the following statements is true of the trading price of Good X?
A) The trading price of Good X is less than the opportunity cost of producing the good in both nations. B) The trading price of Good X is greater than the opportunity cost of producing the good in both nations. C) The trading price of Good X lies between the opportunity costs of producing the good in both nations. D) The trading price of Good X is always equal to the opportunity cost of producing the good in Country A.
Firm A producing one good acquires another firm B producing another good. Price elasticity of demand for Firm A's good is -1.8 and Firm's B is -1.8 . Holding other things constant and assuming both goods are complements, the acquiring firm should
a. lower prices on both goods with a larger decrease in Firm A's good b. lower prices on both goods with a larger decrease in Firm B's good c. Lower prices on both goods by the same amount d. Lower prices on both goods
At a price of $1.00, a local coffee shop is willing to supply 100 cinnamon rolls per day. At a price of $1.20, the coffee shop would be willing to supply 150 cinnamon rolls per day. Using the midpoint method, the price elasticity of supply is about
a. 0.45 b. 0.90 c. 1.11 d. 2.20