## Thursday, January 19, 2017

### 2012 Multiple Choice (Basic)

2012 Multiple Choice (Basic)
(PPC, Comparative Advantage, Supply & Demand)

 Can't happen,, but I like Chuck Norris.

Answer  - (C) amount that must be given up,
(sacrificed, foregone, lost, given-up)

Answer  - (E) increasing opportunity costs
Basic Cheat Sheet here.

Understand that a Country can have absolute advantage in production of a good and have comparative advantage in the good.
A country can have absolute advantage in both goods,
but a country can only have a comparative advantage in one good.
I guess there can also be no comparative advantage.
Comparative advantage cheat sheet here. (I'm finding this sheet isn't working for me)

Economic Profit (includes implicit costs)
Implicit costs are the costs to the firm of paying the entrepreneur to stay in this business,,, in essence,, the entrepreneur must make enough of a return on his investment to stay in this line of business.
Sally could have had a salary of \$25,000 and rented her building for \$10,000 - these are costs
Her accounting costs were \$125,000 and the \$35,000 (foregone salary and rent) = \$160,000
Profit = TR - TC
Sally's total costs  = 125k (explicit costs) + the 35k (implicit included) = \$160,000
and Total revenues = \$155,000
TR(155k) - TC(160k) - \$-5000
Therefore Sally actually lost -5000 on her investment

Salary given up, foregone, lost, sacrificed = \$12,000
Yearly Cost of school = \$4,600
Total opportunity cost = \$16,600

If nothing is sacrificed, foregone, given-up or lost then it is a free good.

 Carl Menger

### 2012 Multiple Choice (Supply & Demand)

2012 Multiple Choice (Supply & Demand)

 I like it...

Answer - (B) increasing demand for pretzels and therefore  the price of pretzels

This question is a bit confusing,,, but answer me this....

If I give you money to hire city workers,,,, what will happen to the demand for rural(country) workers

The demand for rural workers will decrease,,,
Price (wage rate) will fall as demand has decreased for rural workers
and quantity demanded for rural workers will fall (as will their total hours of work)

 Look closely at the marginal utility curve,,,,, it is downward slopingUtility (value, satisfaction, benefit) falls with each unit consumed.

(A) Less supply of oranges, price increases
(B) Price apples increases, demand for oranges increases, price for oranges increases
(C) Oranges cause cancer, demand for oranges decrease, price decreases
(D) Supply oranges decrease, price increases
(E) Advertising increases demand, price increases

Answer - (D) decrease because hamburgers and onions are complements

This question should really be in the Government intervention section for indirect taxes.
If the price is higher due to a tax.
Consumers now pay more for the good, their surplus has decreased
Producers receive less for the good, their surplus has decreased
(((Total surplus is maximised where D=S, at market equilibrium)))