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Chapter 2: Q. 2.19 (page 47)

Suppose that in Fig 2-1, a student currently is allocating her study time in such a way that she is earning a C in mathematics and a C in economics. What is the opportunity cost, measured in terms of the resulting grade change, if this student wishes to reallocate her study time in order to raise her mathematics grade by one letter, from a C to a B?

Short Answer

Expert verified

Opportunity cost is a change of grade in economics from C to D.

Step by step solution

01

Step1. Given information

Student is allocating her study time in a way that she is able to score a C in mathematics and a C in Economics too.

02

Step2. Explanation

If the person wishes to relocate the time for improving grades in mathematics from C to B, as per the production possibility curve or the PPC given to us, she will have to identify the opportunity cost for the same and will have to let go of the C grade in economics and hence earn D.

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Most popular questions from this chapter

Country A and country B produce the same consumption goods and capital goods and currently have identical production possibilities curves. They also have the same resources at present, and they have access to the same technology.

a. At present, does either country have a comparative advantage in producing capital goods? Consumption goods?

b. Currently, country A has chosen to produce more consumption goods, compared with country B. Other things being equal, which country will experience the larger outward shift of its PPC during the next year?

Recently, a woman named Mary Krawiec attended an auction in Troy, New York. At the auction, a bank was seeking to sell a foreclosed property: a large Victorian house suffering from years of neglect in a neighborhood in which many properties had been on the market for years yet remained unsold. Her \(10 offer was the highest bid in the auction, and she handed over a \)10 bill for a title to ownership. Once she acquired the house, however, she became responsible for all taxes on the property and for an overdue water bill of \(2,000. In addition, to make the house habitable, she and her husband devoted months of time and unpaid labor to renovating the property. In the process, they incurred explicit expenses totaling \)65,000. Why do you suppose that the bank was willing to sell the house to Ms. Krawiec for only $10? (Hint: Contemplate the bank’s expected gain, net of all explicit and opportunity costs, if it had attempted to make the house habitable.)

The following table illustrates the points a student can earn on examinations in economics and biology if the student uses all available hours for study. Plot this student’s production possibilities curve. Does the PPC illustrate the law of increasing additional costs?

EconomicsBiology
10040
9060
8075
7085
6093
5098
40100

Senator Borman interjects the following comment after the statements by Senators Creighton and Long reported in Problems 2-10 and 2-11: “In fact, both of my esteemed colleagues are wrong, because an unacceptably large portion of our nation’s resources is currently unemployed.” Of the labeled points on the diagram, which one is consistent with Senator Borman’s position?

Why might the production possibilities curve relating the number of electronic-gadget-accessory boxes at passenger seats to the quantity of seats on a plane be bowed? Explain your reasoning.
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