If Tom spends 4 hours a day on Facebook and the minimum wage in ...

[DyllonKazuo]

If Tom spends 4 hours a day on Facebook and the minimum wage in his country is 7 per hour, what is his opportunity cost of spending time on Facebook? Given that spending time on Facebook has an opportunity cost, does this analysis suggest that Tom
 
  should work rather than spending his time on social networking?

Question 2

When Exxon Mobil reports record profits of more than 10 billion per quarter, we know
 
  A) other oil companies must be struggling.
  B) consumers must be paying high prices at the pump.
  C) consumers must have lost 10 billion in surplus.
  D) all of the above.
  E) none of the above follow from the information given.

[Liddy]

Answer to Question 1

Opportunity cost refers to the best alternative use of a resource. In this case, the resource is time. So, if Tom decided to work instead of spending time on Facebook, he would earn 7 every hour. Therefore, Tom's opportunity cost of spending time on Facebook is equal to 7  4 = 28.
No, economic analysis does not dictate choices. Economics would not tell Tom what to do; it will only help him identify the trade-offs that he is making in his decisions. Whether Tom chooses to work or spend time on Facebook is a normative choice that Tom should make based on costs and benefits.

Answer to Question 2

E