1. Imagine that a high school junior received a bonus check from his boss on the
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Question
1. Imagine that a high school junior received a bonus check from his boss on the last day of his summer job. He decides to save all of that bonus check to pay for his senior trip coming up next year instead of purchasing a much needed new automobile. From an economist’s perspective, which of the following statements about this decision is likely to be true? A)The decision is irrational because anyone can see that choosing a high school trip over a much needed new automobile is an improper use of scarce resources. B)The decision is rational in the sense that it reflects the junior's preference for a senior trip over new automobiles. C)The decision must have been made haphazardly and is therefore irrational
2.Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider .
3.Kayden decided to attend college and gain a degree in accounting. He is now starting his degree. The yearly cost of tuition is $10,000 and he left his auto mechanic shop management job giving up a $32,000 a year to attend college. Kayden’s decision resulted in
an opportunity cost to attend college of $42,000 per year.
4.The law of demand states that as the price of a good decreases,
buyers desire to purchase more of it.
5.Bob sells farm equipment in Iowa and has for twenty years. The last two months he has seen the quantity demanded for high-end tractors decrease by 35% compared to the same time last year. What is a possible explanation for events that have shifted the demand curve?
Customers’ incomes have decreased.
6.A major hurricane is headed towards Southern Florida and as a result panic buying has set in. What would you conclude about the third step of the four step process in this example?
The economic change is likely to affect the demand curve.
7.There is a tax rebate that everyone in the nation receives from the government of $1000. The market for laptops notices a shift because of this. What effect will this rebate have on the laptop market?
This will increase demand
8.In December there is a large demand for evergreen trees. They are sold on city corners and parking lots for Christmas. According to the law of supply, what scenario would you expect to see with the Christmas trees?
The supply and prices of the trees have increased since October
9.After earthquakes hit the California coast and damaged tens of thousands of cars, there was a growing demand and need for automotive repair, glass replacement, dent repair and repainting. In the labor market for car repair, the demand would be represented by
body shop workers looking for work and supply is represented by the automotive body shops and glass repair companies providing jobs.
10.Advances in tax software such as TurboTax influenced the income tax preparer market in the following way:
A)minimizing the length of time it will take to complete the degree.Explanation / Answer
1. A)The decision is irrational because anyone can see that choosing a high school trip over a much needed new automobile is an improper use of scarce resources.
Rational behavior occurs when person spend his or her income on much needed item. When person uses its scarce resources i.e. income in most productive thing then decision is said to be rational.
2. B) the benefit each major would bring and the cost of the degree.
Rational decision is the decision which maximises profit and reduces cost of the person.
3. D) an opportunity cost to attend college of $42,000 per year.
Opportunity cost is the value of next best alternative foregone. While attending college, person sacrifices his or her income of $ 32000 and also paying fees of $ 10,000. So, total opportunity cost = 32000 + 10000 = $ 42000
4. buyers desire to purchase more of it.
Law of demand states inverse relationship between the price of good and its quantity demanded. Increase in price reduces its demand and vice-versa.
5. Customers’ incomes have decreased.
Decrease in consumer's income causes leftward shift of demand curve which causes decrease in demand of tractors.
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