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Chapter 1: Problem 5

In the following examples, state how you would use the principle of marginal analysis to make a decision. a. Deciding how many days to wait before doing your laundry b. Deciding how much library research to do before writing your term paper c. Deciding how many bags of chips to eat d. Deciding how many lectures of a class to skip

Short Answer

Expert verified
Answer: To decide whether to eat one more bag of chips, a person should estimate the marginal benefit (such as satisfaction or enjoyment) and the marginal cost (such as the impact on health or the cost of purchasing additional bags) of eating one more bag of chips. If the marginal benefit is greater than or equal to the marginal cost (MB ≥ MC), they should eat one more bag of chips. If the marginal benefit is less than the marginal cost (MB < MC), they should stop eating chips.

Step by step solution

01

a. Deciding how many days to wait before doing your laundry

In this scenario, we must consider the marginal benefit and marginal cost of waiting one more day before doing laundry. The marginal benefit of waiting one more day might be the saved time or resources, while the marginal cost might be the inconvenience or discomfort of having dirty clothes. We can proceed as follows: 1. Estimate the marginal benefit and marginal cost of waiting one more day before doing laundry. 2. If the marginal benefit is greater than or equal to the marginal cost (MB ≥ MC), wait one more day before doing laundry. 3. If the marginal benefit is less than the marginal cost (MB < MC), do the laundry.
02

b. Deciding how much library research to do before writing your term paper

In this scenario, we must weigh the marginal benefit and marginal cost of doing more library research. The marginal benefit might be improved quality of the term paper, while the marginal cost could be the time spent on research. We can follow these steps: 1. Estimate the marginal benefit and marginal cost of doing more library research. 2. If the marginal benefit is greater than or equal to the marginal cost (MB ≥ MC), conduct more library research. 3. If the marginal benefit is less than the marginal cost (MB < MC), stop researching and start writing the term paper.
03

c. Deciding how many bags of chips to eat

In this scenario, we must evaluate the marginal benefit and marginal cost of eating an additional bag of chips. The marginal benefit might be the satisfaction or enjoyment, while the marginal cost could be the impact on health or the cost of purchasing additional bags. We can proceed with these steps: 1. Estimate the marginal benefit and marginal cost of eating one more bag of chips. 2. If the marginal benefit is greater than or equal to the marginal cost (MB ≥ MC), eat one more bag of chips. 3. If the marginal benefit is less than the marginal cost (MB < MC), stop eating chips.
04

d. Deciding how many lectures of a class to skip

In this scenario, we must balance the marginal benefit and the marginal cost of skipping more lectures. The marginal benefit might be the saved time or opportunity to do other activities, while the marginal cost could be a lower grade or missing important content. We can follow these steps: 1. Estimate the marginal benefit and marginal cost of skipping one more lecture. 2. If the marginal benefit is greater than or equal to the marginal cost (MB ≥ MC), skip one more lecture. 3. If the marginal benefit is less than the marginal cost (MB < MC), attend the lectures.

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Most popular questions from this chapter

In each of the following cases, explain whether you think the situation is efficient or not. If it is not efficient, why not? What actions would make the situation efficient? a. Electricity is included in the rent at your dorm. Some residents in your dorm leave lights, computers, and appliances on when they are not in their rooms. b. Although they cost the same amount to prepare, the cafeteria in your dorm consistently provides too many dishes that diners don't like, such as tofu casserole, and too few dishes that diners do like, such as roast turkey with dressing. c. The enrollment for a particular course exceeds the spaces available. Some students who need to take this course to complete their major are unable to get a space even though others who are taking it as an elective do get a space.

Describe some of the opportunity costs when you decide to do the following. a. Attend college instead of taking a job b. Watch a movie instead of studying for an exam c. Ride the bus instead of driving your car

In 2012, Hurricane Sandy caused massive destruction to the northeast United States. Tens of thousands of people lost their homes and possessions. Even those who weren't directly affected by the destruction were hurt because businesses failed or contracted and jobs dried up. Using one of the principles of economy-wide interaction, explain how government intervention can help in this situation.

In each of the following situations, explain how government intervention could improve society's welfare by changing people's incentives. In what sense is the market going wrong? a. Pollution from auto emissions has reached unhealthy levels. b. Everyone in Woodville would be better off if streetlights were installed in the town. But no individual resident is willing to pay for installation of a streetlight in front of his or her house because it is impossible to recoup the cost by charging other residents for the benefit they receive from it.

The Hatfield family lives on the east side of the Hatatoochie River, and the McCoy family lives on the west side. Each family's diet consists of fried chicken and corn-on-the-cob, and each is self-sufficient, raising their own chickens and growing their own corn. Explain the conditions under which each of the following would be true.
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