Refer to the table below. Given that an individual's opportunity cost of time is $30 per hour, which of the two apartments should she rent?
Apartment Monthly Commuting Time (Hours) Monthly Rent ($)
1 60 3,600
2 20 4,500
What will be an ideal response?
The opportunity cost of commuting per month from Apartment 1 = 60 × $30 = $1,800.
Total monthly cost of renting Apartment 1 = $1,800 + $3,600 = $5,400.
The opportunity cost of commuting per month from Apartment 2 = 20 × $30 = $600
Total monthly cost of renting Apartment 2 = $600 + $4,500 = $5,100
Therefore, the individual chooses Apartment 2 as she incurs a lower cost if she rents Apartment 2 than when she rents Apartment 1.
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Refer to Figure 17-2. At which point are inflation expectations equal to the actual inflation rate?
A) A B) B C) C D) all of the above
A firm is considering entering a market where demand for its product is Q = 100 - P. This demand function implies that the firm’s marginal revenue function is MR = 100 - 2Q. The firm’s total cost of producing the product for that market is TC = 500 + 10Q + Q2 which indicates that its marginal cost function is MC = 10 + Q. Indicate whether or not the firm should enter the market by calculating the firm’s profit (Hint: to find the price that the firm should charge, take the profit maximizing quantity and plug it into the demand equation). Describe how your previous answer would change if the firm’s total cost function became TC = 1000 + 10Q + Q2.
What will be an ideal response?