1. George is deciding whether to pay $5 for a can of soft drink at a market stal
ID: 1174397 • Letter: 1
Question
1. George is deciding whether to pay $5 for a can of soft drink at a market stall or wait 30 minutes for a free can of soft drink at another stall. An economist would reason that:
1. The scarcity principle does not apply.
2. Soft drink is a scarce resource.
3. Time is a scarce resource.
Which of the above statements are true:
Only 1 is true.
b. Only 2 is true.
Both 1 and 2 are true.
Both 2 and 3 are true.
All three are true.
2.
Andy is a baker in Brisbane. It costs him $0.50 to produce each loaf of bread. Andy can sell 10 loaves of bread for $40 and 11 loaves of bread for $43.
Which of the following statements are true:
The marginal cost of producing a loaf of bread is $0.50.
b. Andy should produce the eleventh loaf of bread because the marginal benefit is greater than the average cost.
c. Andy should produce the eleventh loaf of bread because the marginal benefit is greater than average cost.
d. There is insufficient information to determine the marginal benefit of producing the eleventh loaf of bread.
e. The marginal benefit of producing the eleventh loaf of bread is $3.
3. Lucy pays $40 to enter a theme park. When inside the park, Lucy considers how many rides she should have on the “Big Drop”. She expects to gain an incremental benefit of $25 of enjoyment from the first ride, then gain subsequent incremental benefits of $20 from the second, $15 from the third, $10 from the fourth and $5 from the fifth. The cost of each ride is $15.
a. Using marginal analysis, Lucy should have how many rides?
b. The maximum surplus for Lucy, from doing the number of rides you found in part a, is? $?. (Answer to the nearest whole number (with no decimal places).)
a.Only 1 is true.
b. Only 2 is true.
c.Both 1 and 2 are true.
d.Both 2 and 3 are true.
e.All three are true.
Explanation / Answer
1..)
Right answer is : ( d)
In case of scarcity ; demand > availability of resource.
George either has to pay $ 5 or wait for getting it free. Hence, it suggests that demand is greater than availability.
2)
Right answer is (e).
Marginal benefit of producing eleventh loaf of bread is ; 43 – 40
=$ 3
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