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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 August \(2007,\) a sharp downturn in the U.S. housing market reduced the income of many who worked in the home construction industry. A Wall Street Journal news article reported that Walmart's wire-transfer business was likely to suffer because many construction workers are Hispanics who regularly send part of their wages back to relatives in their home countries via Walmart. With this information, use one of the principles of economy-wide interaction to trace a chain of links that explains how reduced spending for U.S. home purchases is likely to affect the performance of the Mexican economy.

Which of the following situations describes an equilibrium? Which does not? If the situation does not describe an equilibrium, what would an equilibrium look like? a. Many people regularly commute from the suburbs to downtown Pleasantville. Due to traffic congestion, the trip takes 30 minutes when you travel by highway but only 15 minutes when you go by side streets. b. At the intersection of Main and Broadway are two gas stations. One station charges \(\$ 3.00\) per gallon for regular gas and the other charges \(\$ 2.85\) per gallon. Customers can get service immediately at the first station but must wait in a long line at the second. c. Every student enrolled in Economics 101 must also attend a weekly tutorial. This year there are two sections offered: section A and section B, which meet at the same time in adjoining classrooms and are taught by equally competent instructors. Section A is overcrowded, with people sitting on the floor and often unable to see what is written on the board at the front of the room. Section \(\mathrm{B}\) has many empty seats.

Discuss the efficiency and equity implications of each of the following policies. How would you go about balancing the concerns of equity and efficiency in these areas? a. The government pays the full tuition for every college student to study whatever subject he or she wishes. b. When people lose their jobs, the government provides unemployment benefits until they find new ones.

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.

Governments often adopt certain policies in order to promote desired behavior among their citizens. For each of the following policies, determine what the incentive is and what behavior the government wishes to promote. In each case, why do you think that the government might wish to change people's behavior, rather than allow their actions to be solely determined by individual choice? a. A tax of \(\$ 5\) per pack is imposed on cigarettes. b. The government pays parents \(\$ 100\) when their child is vaccinated for measles. c. The government pays college students to tutor children from low-income families. d. The government imposes a tax on the amount of air pollution that a company discharges.
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