Microeconomics
3rd Canadian Edition
by Dean S. Karlan
Complete Chapter Solutions Manual
are included (Ch 1 to 21)
** Immediate Download
** Swift Response
** All Chapters included
** ABA Teaching Notes
,CHAPTER 1
ECONOMICS AND LIFE
Solutions to End-of-Chapter Questions
Review Questions
1. Suppose you are shopping for new clothes to wear to job interviews, but you’re on a tight budget. In
this situation, what are your wants and constraints? What does it mean to behave rationally in the
face of scarcity? [LO 1.1]
Answer: If you are deciding what to buy for a job interview, your want is to buy clothing that looks
clean and professional, so you can present the best possible impression to potential employers. Your
constraint is the amount of money you can spend on this clothing. A person behaving rationally
would buy the nicest clothes they could afford.
2. You are a student with a demanding schedule of classes. You also work part-time and your
supervisor allows you to determine your schedule. In this situation, what is your scarce resource?
How do you decide how many hours to work? [LO 1.1]
Answer: Your scarce resource is time. You need both time to study and time to work. Presumably,
you want to do well in school and also make money. You will try to balance your schedule so that
you work as much as possible while still having enough time to study and do well in school.
3. Think about the definition of scarcity that you learned in this chapter. Name three ways that you
confront scarcity in your own life. [LO 1.1]
Answer: We face scarcity in many aspects of our lives. I love to travel and explore new places. I face
scarcity in both time and money that keeps me from traveling as often as I would like. In my
professional life, I also face scarcity. There are lots of worthy projects I would like my department to
take on, but I am limited in my available resources of employees, time, and budget. Collectively, as a
society, we want more camping sites in the summer months. But there are limited number of sites
available.
4. When shopping for your interview clothes, what are some trade-offs you face? What is the
opportunity cost of buying new clothes? What are the benefits? How do you balance the two? [LO
1.2]
Answer: One trade-off is that the money you spend on clothes for a job interview could be spent on
other things instead. One opportunity cost of buying new clothes is other things forgone. Another
opportunity cost is the time you spend shopping, which could be spent preparing for your interview
or playing Frisbee. The benefits include looking put-together during the interview, which provides a
boost to your job prospects. You balance the costs and benefits by accepting costs that are less than
(or no greater than) the benefits they provide.
, 5. You have an 8:00 class this morning but you are feeling extremely tired. How do you decide whether
to get some extra sleep or go to class? [LO 1.2]
Answer: If you are behaving rationally, you decide by comparing the trade-offs. The opportunity
cost of going to class is missing out on some extra sleep. Depending on what else is on your schedule
that day (perhaps an important job interview), it may make sense to choose extra sleep over class.
The opportunity cost of extra sleep is that you will miss the lecture. If your grade will suffer
significantly by your absence, you may want to grab some coffee and go to class!
6. It’s Friday night. You already have a ticket to a concert, which cost you $30. A friend invites you to
go out for a game of paintball instead. Admission would cost you $25, and you think you’d get $25
worth of enjoyment out of it. Your concert ticket is nonrefundable. What is your opportunity cost (in
dollars) of playing paintball? [LO 1.2]
Answer: The opportunity cost of going to play paintball is whatever amount of enjoyment (in
dollars) you would get out of going to the concert. The thirty dollars you paid for the concert ticket is
not relevant to the decision, as it is a sunk cost and is nonrefundable regardless of what you do.
7. Suppose you have two job offers and are considering the trade-offs between them. Job A pays
$45,000 per year and includes health insurance and two weeks of paid vacation. Job B pays $30,000
per year and includes four weeks of paid vacation but no health insurance. [LO 1.2]
a. List the benefits of Job A and the benefits of Job B.
b. List the opportunity cost of Job A and the opportunity cost of Job B.
Answer:
a. The benefits of Job A are the extra pay and health insurance. For Job B, the benefit is two extra
weeks of vacation.
b. The opportunity cost of Job A is losing out on the extra two weeks of vacation that comes with
Job B. For Job B, the opportunity costs are the extra $15,000 in salary along with the health
insurance.
8. Your former neighbor gave you his lawnmower when he moved. You are thinking of using this gift to
mow lawns in your neighborhood this summer for extra cash. As you think about what to charge
your neighbors and whether this idea is worth your effort, what opportunity costs do you need to
consider? [LO 1.2]
Answer: You need to consider the opportunity cost of mowing lawns. Your lawn mowing business
would need to cover the opportunity cost of what you could earn in another summer job. You also
need to consider the cost lawn mowing (e.g. of gasoline for the mower) and the value of the lawn
mower itself. Just because it was a gift does not mean that it has no opportunity cost. The
opportunity cost of using the lawnmower for your business is its sale value, if you decide to sell the
gift rather than use it yourself. Your lawn mowing business needs to cover all of these costs (the
value of your time in another job, gasoline, and the sale value of the lawnmower) in order for it to
be a worthwhile endeavor.
3rd Canadian Edition
by Dean S. Karlan
Complete Chapter Solutions Manual
are included (Ch 1 to 21)
** Immediate Download
** Swift Response
** All Chapters included
** ABA Teaching Notes
,CHAPTER 1
ECONOMICS AND LIFE
Solutions to End-of-Chapter Questions
Review Questions
1. Suppose you are shopping for new clothes to wear to job interviews, but you’re on a tight budget. In
this situation, what are your wants and constraints? What does it mean to behave rationally in the
face of scarcity? [LO 1.1]
Answer: If you are deciding what to buy for a job interview, your want is to buy clothing that looks
clean and professional, so you can present the best possible impression to potential employers. Your
constraint is the amount of money you can spend on this clothing. A person behaving rationally
would buy the nicest clothes they could afford.
2. You are a student with a demanding schedule of classes. You also work part-time and your
supervisor allows you to determine your schedule. In this situation, what is your scarce resource?
How do you decide how many hours to work? [LO 1.1]
Answer: Your scarce resource is time. You need both time to study and time to work. Presumably,
you want to do well in school and also make money. You will try to balance your schedule so that
you work as much as possible while still having enough time to study and do well in school.
3. Think about the definition of scarcity that you learned in this chapter. Name three ways that you
confront scarcity in your own life. [LO 1.1]
Answer: We face scarcity in many aspects of our lives. I love to travel and explore new places. I face
scarcity in both time and money that keeps me from traveling as often as I would like. In my
professional life, I also face scarcity. There are lots of worthy projects I would like my department to
take on, but I am limited in my available resources of employees, time, and budget. Collectively, as a
society, we want more camping sites in the summer months. But there are limited number of sites
available.
4. When shopping for your interview clothes, what are some trade-offs you face? What is the
opportunity cost of buying new clothes? What are the benefits? How do you balance the two? [LO
1.2]
Answer: One trade-off is that the money you spend on clothes for a job interview could be spent on
other things instead. One opportunity cost of buying new clothes is other things forgone. Another
opportunity cost is the time you spend shopping, which could be spent preparing for your interview
or playing Frisbee. The benefits include looking put-together during the interview, which provides a
boost to your job prospects. You balance the costs and benefits by accepting costs that are less than
(or no greater than) the benefits they provide.
, 5. You have an 8:00 class this morning but you are feeling extremely tired. How do you decide whether
to get some extra sleep or go to class? [LO 1.2]
Answer: If you are behaving rationally, you decide by comparing the trade-offs. The opportunity
cost of going to class is missing out on some extra sleep. Depending on what else is on your schedule
that day (perhaps an important job interview), it may make sense to choose extra sleep over class.
The opportunity cost of extra sleep is that you will miss the lecture. If your grade will suffer
significantly by your absence, you may want to grab some coffee and go to class!
6. It’s Friday night. You already have a ticket to a concert, which cost you $30. A friend invites you to
go out for a game of paintball instead. Admission would cost you $25, and you think you’d get $25
worth of enjoyment out of it. Your concert ticket is nonrefundable. What is your opportunity cost (in
dollars) of playing paintball? [LO 1.2]
Answer: The opportunity cost of going to play paintball is whatever amount of enjoyment (in
dollars) you would get out of going to the concert. The thirty dollars you paid for the concert ticket is
not relevant to the decision, as it is a sunk cost and is nonrefundable regardless of what you do.
7. Suppose you have two job offers and are considering the trade-offs between them. Job A pays
$45,000 per year and includes health insurance and two weeks of paid vacation. Job B pays $30,000
per year and includes four weeks of paid vacation but no health insurance. [LO 1.2]
a. List the benefits of Job A and the benefits of Job B.
b. List the opportunity cost of Job A and the opportunity cost of Job B.
Answer:
a. The benefits of Job A are the extra pay and health insurance. For Job B, the benefit is two extra
weeks of vacation.
b. The opportunity cost of Job A is losing out on the extra two weeks of vacation that comes with
Job B. For Job B, the opportunity costs are the extra $15,000 in salary along with the health
insurance.
8. Your former neighbor gave you his lawnmower when he moved. You are thinking of using this gift to
mow lawns in your neighborhood this summer for extra cash. As you think about what to charge
your neighbors and whether this idea is worth your effort, what opportunity costs do you need to
consider? [LO 1.2]
Answer: You need to consider the opportunity cost of mowing lawns. Your lawn mowing business
would need to cover the opportunity cost of what you could earn in another summer job. You also
need to consider the cost lawn mowing (e.g. of gasoline for the mower) and the value of the lawn
mower itself. Just because it was a gift does not mean that it has no opportunity cost. The
opportunity cost of using the lawnmower for your business is its sale value, if you decide to sell the
gift rather than use it yourself. Your lawn mowing business needs to cover all of these costs (the
value of your time in another job, gasoline, and the sale value of the lawnmower) in order for it to
be a worthwhile endeavor.
