Question

1.Since they have already paid for their tickets, it does not make economic sense for fans to leave before a game is finished.

true/False

2.

(Problem 3a). Bruno can spend his income on two different goods: smoothies and energy bars. For each of the following three situations, decide if the given consumption bundle is within Bruno's consumption possibilities. Then decide if it lies on the budget line or not. Smoothies cost $2 each, and energy bars cost $3 each. Bruno has income of $60. He is considering a consumption bundle containing 15 smoothies and 10 energy bars.

This consumption bundle is within Bruno's consumption possibilities and lies on his budget line. This consumption bundle is within Bruno's consumption possibilities but lies below his budget line. This consumption bundle is not within Bruno's consumption possibilities; it lies above his budget line

Answer 1

Question 1

Fans have already paid for the tickets and the amount paid cannot be recovered.

So, the amount paid for the tickets is sunk cost.

Sunk cost should not be taken into account when making the future economic decisions.

So, decision pertaining to whether to stay or leave the game before it is finished can be taken independent of the amount paid for tickets and it is economically sensible decision.

Thus, the given statement is False.

Question 2

Price of smoothies is $2 each.

Price of energy bars is $3 each.

Income of Bruno is $60.

He wants to consume 15 smoothies and 10 energy bars.

So,

Total expenditure = [15 * $2] + [10 * $3] = $30 + $30 = $60

Thus, Bruno has to spent $60 for this bundle.

His income is $60. So, he can afford this bundle.

When person exhaust all his income on the consumption bundle then such bundle lies on the budget line.

So,

This consumption bundle is within Bruno's consumption possibilities and lies on his budget line.

Hence, the correct answer is the option (1).