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1.No monetary payment takes place when an implicit cost is incurred
2.Money must change hands before a cost can be incurred
3.Cost implies that a sacrifice has been made
4.Costs may be either explicit costs or implicit costs
Find the equilibrium price and quantity. Show your work. (2)
Question 2: Production point Wheat (bushels) Soybeans (bushels) A 1,500 and 0 B 1,000 and 2,250 C 500 and 3,500 D 0 and 4,000 The table above gives the production possibilities frontier for a nation that produces wheat and soybeans. Use the information in that table to complete the table below, which has in it the opportunity costs of moving from one production point to another. Do not forget to note the units of the opportunity costs. Movement from Opportunity cost Movement from Opportunity cost A to B D to C B to C C to B C to D B to A
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Question:
A consumer has preferences over two goods represented by the utility function u(x,y) = ln(x) + .5y, an endowment e(x,y) = (ex, ey) and facing prices px, p.
-Suppose the consumer's endowment is not at her optimal consumption point, and that after trading she would be a net buyer of good y. Draw the budget constraint and two indifference curves: one through her endowmnet point, and the other through her optimal consumption bundle.
B) Suppose that a black market for the medical drug arises, with pharmaceutical firms secretly selling the drug at higher prices. Illustrate on a graph, the black market for this medical drug including the implicit supply schedule, the ceiling price, the black-market supply and demand and the highest feasible black market price.
Why you can get a free college education in Germany but not in California
Even American students can get a free college degree in Germany, where high taxes pay for colleges. Despite college being free, fewer students in Germany earn college degrees than in the United States and more enter vocational apprenticeships.
Source: Los Angeles Times, October 29, 2015 If California adopted the German model of higher education, how would that change for whom goods and services are produced
Ramsha is trying to determine her consumption possibilities if she works as a Research Assistant (RA). If Ramsha
works 10 hours per week, she can spend Rs. 5000 on all other expenditures. Her total time endowment which
she can allocate between working as a RA and leisure time is 20 hours per week.
2a. Ramsha’s friend remarks that Ramsha is willing to trade an extra hour of leisure for Rs. 500 worth of
consumption on all other goods? Explain whether this is a correct observation. [ 3 points]
2b. Write down Ramsha’s consumption choice set. [2 points]
2c. Suppose Ramsha learns that she will get paid half the rate for any work exceeding 10 hours per week. Draw a
labelled graph showing her new choice set, showing the intercepts and slope of the budget constraint. [5 points]
land originally cost US Airways $375,000. The airline is considering building a
new training center on this land. US Airways determined that the proposal to
build the new facility is acceptable if the original cost of the land is used in theanalysis, but the proposal does not meet the airline’s project acceptance criteria if
the land cost is above $850,000. A developer recently offered US Airways $2.5
million for the land. Should US Airways build the training facility at this
location?
