Problems

1. The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $4.5 million. If it would cost $3 million to finish development and make the product, you kshou id /shoul a not) go ahead and do so. The most you should pay to complete development is $ million.

2. Consider the outdoor activity of skiing. Assume that the rental cost of ski equipment is $35 and a lift ticket costs $60. If you go skiing, you would also wear the ski jacket you purchased last year for $180. If you do not go skiing, you could either work at your part-time job, which would earn you $80, or study at the library, which you value at $25.

Suppose that you were planning to spend Saturday studying at the library, but a friend asks you to go skiing.

The opportunity cost of going skiing is $

Now suppose you had been planning to spend the day working at your part-time job.

What is included in the opportunity cost of going skiing in this case? Check all that apply.

The cost of a lift ticket

The value of your time spent studying The rental of any ski equipment you need The wages you forgo by going skiing

The cost of the ski jacket you purchased last year

3. You have $20 in your wallet. You have a choice between using this amount to enter a baseball pool, which will give you the opportunity to win $80, and spending the money on buying something else. Which of the following is the opportunity cost of entering a baseball pool with $20?

Nothing, because you would spend the money anyway.

The value you could obtain by spending the money on buying something else.

The opportunity of winning $80.

4. Because poor people are „more/less) likely to have adequate healthcare, guaranteeing everyone in society the best healthcare would likely (increase/decrease) equality.

Paying laid-off workers unemployment benefits until they find a new job will likely (decrease/increase) equality and (increase/decrease, efficiency.

5. Prices in Greece doubled every few days in 1944. The term hyperinflation refers to situations of abnormally high inflation.

Which of the following is the most likely reason for the Greek hyperinflation in 1944? The government significantly reduced its expenditure, which increased unemployment.

The government drastically increased taxes to fund its military costs.
The government financed its expenditures by increasing the supply of money.