Tutorial Wk1

Multiple Choice

•usually do so because they cannot get into college.: 0 (0%) High-school athletes who skip college to become professional athletes •obviously do not understand the value of a college education: 1 (6%) •usually do so because they cannot get into college.: 0 (0%) •understand that the opportunity cost of attending college is very high.: 4 (26%) •are not making a rational decision since the marginal benefits of college outweigh the marginal costs of college for high-school athletes: 10 (66%) •I don't know: 0 (0%)

When calculating the cost of college, which of the following should you probably not include? The cost of tuition: 0 (0%) The cost of books required for college classes: 0 (0%) The income you would have earned had you not gone to college: 7 (43%) The cost of rent for your off- campus apartment, which you would have to rent anyways: 8 (50%) I don't know: 1 (6%)

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal cost of leaving was greater than the marginal benefit.: 4 (28%) benefit of leaving was greater than the marginal cost: 8 (57%) benefit of teaching was greater than the marginal cost.: 1 (7%) All of the above are correct.: 1 (7%) I don't know: 0 (0%)

Russell spends an hour studying instead of playing tennis Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is •the improvement in his grades from studying for the hour.: 1 (6%) •the improvement in his grades from studying minus the enjoyment of playing tennis: 2 (12%) •the enjoyment and exercise he would have received had he played tennis: 10 (62%) •zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis: 3 (18%) •I don't know: 0

Open Questions 2,5,7

Extra Review Question 1,3,5

After studying this chapter you should be able to 􀂾 Define economics and discuss economic naturalism 􀂾 Understand why scarcity implies tradeoffs 􀂾 Define the Cost-Benefit Principle and illustrate its relationship to scarcity 􀂾 Understand how rationality relates to the Cost-Benefit Principle 􀂾 Define marginal benefit and marginal cost 􀂾 Define opportunity cost 􀂾 Calculate marginal benefit and marginal cost After studying this chapter you should be able to

After studying this chapter you should be able to 􀂾 Define economics 􀂾 Discuss the topics covered in microeconomics 􀂾 Understand the efficient allocation of resources 􀂾 Identify which costs matter in making decisions 􀂾 Identify the opportunity cost of an activity 􀂾 Define sunk costs After studying this chapter you should be able to

After studying this chapter you should be able to 􀂾 Identify sunk costs 􀂾 Apply the concept of sunk costs to cost-benefit analysis 􀂾 Define average cost 􀂾 Identify which costs matter in making decisions After studying this chapter you should be able to