Essay on Ans1A

1024 Words May 6th, 2015 5 Pages
Microeconomics: Week 1 Review Questions

1) Suppose that the wages of young high school graduates fell. In what sense has the true “cost” of a college education been changed by this development.

Other things equal, if wages of young high school graduates decline, the potential alternative use of time spent studying in higher education…namely, working with only a high school education…has relatively less value. Therefore, the opportunity cost of student study time measured in foregone wages is lower. Assuming no change in the explicit costs of higher education (tuition, fees& books), the opportunity cost decline has reduced the overall cost of higher education.

2)Suppose that a real estate developer buys a parcel of land for 3
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In determining the net benefits of the ban these opportunity costs (plus enforcement costs of the ban) should be subtracted from the benefits of the ban (benefits resulting from a lower incidence of skin cancer).

5) One concept related to opportunity cost that is introduced in your text and discussed in my lecture notes for this week is the concept of "comparative advantage." My notes give an example at the level of countries. Here’s one at the level of individuals. It takes nimble Naomi 2.5 hrs to input 50 records into a data base and 4 hrs to debug 500 lines of C++ code; while fat fingered Freddie takes 4 hrs to input 50 records into the data base and 8 hrs to debug 500 lines of code. If you’re managing Freddie and Naomi and have 800 new records which must be entered into the firm’s data base and 3000 lines of code in a new program which must be debugged-- all by the end of the week-- how do you divide up the work between Freddie and Naomi so that no one works any overtime? (No, you can’t fire Freddie and hire someone more competent...he’s the boss’s nephew.) Explain your answer in terms of the comparative advantage principle.

Naomi has a comparative advantage (lower opportunity cost) in debugging code, while Freddie has the comparative advantage (lower opportunity cost) in entering records. (In

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