Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. What is the opportunity cost to Cathy of making a cake?
A. 1 pie.
B. 1.5 pies.
C. 2/3 of a pie.
D. 1.33 pies.
Answer: C
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If the nominal interest rate is 2 percent and the inflation rate is 4 percent, then the real rate of interest is
A) -2 percent. B) 2 percent. C) 3 percent. D) 6 percent.
If the opportunity cost of time is ________, and an individual spends ________ commuting every month, his opportunity cost of commute is $100 every month
A) $5 per hour; 10 hours B) $8 per hour; 20 hours C) 10 per hour; 10 hours D) $12 per hour; 5 hours
Assume a monopolistically competitive firm is earning an economic profit. The marginal revenue from selling an additional unit is $30 and the marginal cost of producing that additional unit is $23 . The firm should
a. change neither its price nor its output level b. reduce its price and increase its output level c. increase its price and reduce its output level d. reduce both its price and its output level e. increase both its price and its output level
Other things the same, a higher interest rate induces people to
a. save more, so the supply of loanable funds slopes upward. b. save less, so the supply of loanable funds slopes downward. c. invest more, so the supply of loanable funds slopes upward. d. invest less, so the supply of loanable funds slopes downward.