Author Question: The marginal cost of educating a student is 30,000, and this cost is independent of the number of ... (Read 78 times)

mikaylakyoung · **on:** Jun 29, 2018

The marginal cost of educating a student is 30,000, and this cost is independent of the number of students. The figure above shows the marginal private benefit that a student receives from education.

If schools are competitive, how many students are enrolled? A) zero
B) 20,000
C) 50,000
D) It depends on the demand.

Question 2

Referring to Situation 1 suppose that you decide that you have to fire the first and the third executive without hiring any replacements.

What would be the opportunity cost of the second executive's work? Explain why your answer is not the same as in the question above.

medine · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

The opportunity cost of second executive's work is 800,000 . The reason is that since each executive can perform any work that they other can then it makes sense to change the second executive's job so that he is now doing the most highly valued work that with the 1,000,000 value. That leaves the 800,000 job undone which means that becomes the opportunity cost of the second executive's work.