Question

Answer need to be in paragraph

1) Explain and discuss how you think studying for an exam is subject to the Law of Diminishing Returns. You might also throw into the discussion how this relates to opportunity cost and economic choice (marginal cost versus marginal benefit) of how you choose to spend your time.

THIS IS A GOOD POINT, NEAR THE MIDDLE OF THE SEMESTER, TO POINT OUT AGAIN THAT EVERY DISCUSSION REQUIRES AT LEAST A COUPLE OF PARAGRAPHS, AND THAT EVERY DISCUSSION IS BASED ON THE RELEVANT READINGS. THE GOAL IS TO SHOW THAT YOU KNOW HOW TO USE CONCEPTS LEARNED IN THE COURSE. .

2) TIME PERIODS

a.What is the distinction made by economists between the short run and the long run? Why is it important?

b. Cite and explain examples from various sized firms and/or various products  in the garment industry.

3) Implicit and Explicit Costs

(a) Why do economists look at implicit costs?

(b) Look at two businesses (one big and one small) and for each identify what might be their implicit costs. Be specific!

Answer 1

1. Law of diminishing marginal utility says that if the same unit of commodity consumed continuously, then the utility achieved from every successive unit starts declining.

The opportunity cost is the cost of next best alternative which will increase with the continuous consumption. As now one is willing to sacrifice more and more to obtain different commodity.

2. Short run is the time period when the fixed capital tends to remain same and production can be increased by increase in variable cost.

Whereas, long run is a time period where production can be increased by changing both fixed and variable cost.

Short run and long run concept is important for a industry for cost calculation of produced goods.

3. In explicit cost there is outflow of cash, which is not there in case of implicit cost.

At the time of production the cost which actually incurred is referred as explicit cost, whereas implicit cost are not incurred directly.

In a large business explicit cost may be advertisement expense and labor cost. Implicit cost may be interest on owners capital.

In a small business the explicit cost may be wages. Implicit cost may be rent of building.