ECO 201: Principles of Microeconomics Homework 2 (due by 11:59 p.mon June 4, 201

Question

ECO 201: Principles of Microeconomics Homework 2 (due by 11:59 p.mon June 4, 2018) Maximum points possible: 20 The answers/diagrams can be handwritten, typed or both. Student Name Use the concept of opportunity cost to explain the following situations: More people choose to get graduate degrees when the job market is poor. 1. (3 points a. b. More people choose to do their own home repairs when the economy is slow and hourly wages are down c. Convenience stores, which have higher prices than supermarkets, cater to busy people. 2. (2 points) Are the following statements TRUE or FALSE? Explain your answers. a) "We should lower taxes to encourage more work" is a positive statement b) "The system of public education generates greater benefits to society than the cost of

Explanation / Answer

Answer 1:

a. This is because when the job market is poor then salaries are low and thus opportunity cost of getting graduate degress is also low. Thus, people start pursuing graduate degree courses.

b. This is because opportunity cost in this case is low as the income forgone will be less and when wages are low then people will do the worl themselves as opportunity cost of calling the home repair person will lead to fall in paying him wages from the already low wages. Thus, people find it profitable to do the work themselves.

c. For busy people, opportunity cost of going to separate shops is high because they value time more. Going to convience stores save time and thus their opportunity cost is low.

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