Author Question: You have decided that you are going to consume 600 calories of beer and snacks at a party Saturday ... (Read 66 times)

jessicacav · **on:** Jun 29, 2018

You have decided that you are going to consume 600 calories of beer and snacks at a party Saturday night. A beer has 150 calories and a snack has 75 calories.

a. Create a table that shows the various combinations of beer and snacks you can consume. To keep things simple, use only round numbers (e.g., you could choose 1 or 2 beers but not 1.5 beers).
b. What is the opportunity cost of a beer?

Question 2

How is it that economists can claim that perfectly competitive markets give people what they want?

What will be an ideal response?

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

Answer to Question 1

a. Suppose you choose to consume 0 beers. Then you could use all 600 calories on snacks. Since snacks have 75 calories you could consume 600 / 75 = 8 snacks. Now suppose you choose 1 beer. A beer has 150 calories and so you would be left with 600 150 = 450 calories for snacks. You could therefore consume 450 / 75 = 6 snacks if you choose 1 beer. You can use the same logic to complete the table below.

b. If you consume 1 more beer you will have 150 fewer calories for snacks. Since a snack has 75 calories, consuming one more beer means that you will have to give up 150 / 75 = 2 snacks. The opportunity cost of a beer is therefore 2 snacks.

Answer to Question 2

Because perfectly competitive firms will produce as long as the price of their product is greater than the marginal cost of production, they will continue to produce as long as a gain for society is possible. The market thus guarantees that the right things are produced.