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💸 Unit 1: Basic Economic Concepts
1.0Unit 1: Basic Economic Concepts
1.1Basic Economic Concepts: Scarcity
1.2Resource Allocation and Economic Systems
1.3Production Possibilities Curve (PPC)
📈 Unit 2: Supply and Demand
2.4Price Elasticity of Supply
2.6Market Equilibrium and Consumer and Producer Surplus
2.7Market Disequilibrium and Changes in Equilibrium
2.8The Effects of Government Intervention in Markets
⚙️ Unit 3: Production, Cost, and the Perfect Competition Model
3.6Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market
📊 Unit 4: Imperfect Competition
4.1Introduction to Imperfectly Competitive Markets
💰 Unit 5: Factor Markets
5.2Changes in Factor Demand and Factor Supply
5.3Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
🏛 Unit 6: Market Failure and Role of Government
6.1Socially Efficient and Inefficient Market Outcomes
6.3Public and Private Goods
6.4The Effects of Government Intervention in Different Market Structures
⏱️ 3 min read
September 17, 2020
In economics, consumers make rational choices by weighing the costs and benefits. In economics, marginal means additional, or the change in the total (you will see this term a lot!)
The general rule in economics is to consume where marginal benefit = marginal cost, also known as the benefit maximizing quantity.
After graduating high school, Billy decided to enroll in a two-year program at the local community college rather than to accept an internship that offered a salary of $15,000 per year. If the annual tuition and fees are $5,000, the annual opportunity cost of attending the community college is:
Opportunity cost includes both explicit and implicit costs. In this question, the $15,000 in salary for the internship you gave up is the implicit cost, and the $5,000 in tuition and fees is the explicit cost of going to the community college.
All of the following are included in computing the opportunity cost of attending college EXCEPT:
(A) interest paid on student loans
(B) wages the student gave up to attend college
(C) money spent on books and supplies
(D) money spent on college tuition
(E) money spent on clothing expenses
No matter what decision you make, you will always have clothing expenses
Sylvia works part-time at a local convenience store and earns $12 per hour. She wants to spend next Saturday afternoon attending a sporting event. The full price of the sporting event is $100, but Sylvia was able to get a discounted price of $75 from her cousin who purchased the ticket and is unable to attend. If Sylvia took 5 hours off from her job to attend the sporting event, what was her opportunity cost of attending the concert?
Sylvia would have earned $60 from working for 5 hours (implicit cost). She also spent $75 on the ticket (explicit cost). 60 + 75 = 135.
Jane’s marginal benefit per day from drinking Pepsi is given in the table below. The table shows that she values the first Pepsi she drinks at $1.25, the second at $1.20, and so on. If the price of a Pepsi is $1.00, how many should Jane drink?
The optimal number of Pepsis that Jane should drink is 3 because that is where marginal cost ($1.00, the price of a Pepsi) is equal to the marginal benefit of the 3rd Pepsi.
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