Question

1. Assume you decide to go to the movies the night before an exam instead of staying home to study. You scored an 80% on the exam. Generally, you score 87% on exams.

a. What was the opportunity cost of going to the movies?

b. Was the cost greater than the benefit?

2. How is marginal cost measured? Slope of a point on the curve = O.C. of the good on the X axis at that point

3. How is marginal benefit measured?

4. How does economic growth influence the production possibilities frontier?

Answer 1

1. (a) The opportunity cost of going to the movies = (87 -80)% =7% loss in the score.

(b) The benefit from the movie is not given in the question , so I assume that cost is greater than benefit.

2. Marginal cost is the change in the total cost that incurr in producing extra unit of output.It is measured y the change in total cost/ change in quantity. It represents the slope of the total cost curve. It is represented as the supply curve.

Slope of a point on the indifference curve is equal to the opportunity cost of the good on the X-axis at that point. Because slope also tells us the change in good y/ change in good X. And opportunity cost also tells us that how much amount of good y, that is given up in the consumption of another good i.e x.

3. Marginal benefit of any good is the additional utility that the consumer gets from the consumption of one additional unit. It is measured by change in total utility/ change in quantity. It is represented as the demand curve. The marginal benefit is the maximum amount that the person is willing to pay for the consumption of one additional unit of good.

4. Economic growth shifts the production possibilities frontier outward.