Author Question: Suppose you could measure the value in monetary terms for the following three things that you could ... (Read 71 times)

xroflmao · **on:** Jun 29, 2018

Suppose you could measure the value in monetary terms for the following three things that you could do with your time this Friday evening: a) doing your homework - 50, 2) spending time with your friends - 40 or c) taking a nap - 30 .

Armed with only this information which activity has the lowest opportunity cost? Which two activities have the same opportunity cost? Based on what you have discovered what is the best use of your time and why?

Question 2

If an average cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

A) incur an economic loss.
B) make zero economic profit, that is, its owners make a normal profit.
C) make an economic profit of 4 million.
D) make an economic profit of 9 million.

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

Answer to Question 1

The opportunity cost of doing your homework is only 40 which is the next best available alternative. Spending time with your friends has an opportunity cost of 50 since this is the next best available alternative. And it turns out this is also the opportunity cost of taking a nap as well. Therefore, the best use of your time is to spend it doing your homework since the opportunity cost of doing so is lower than the other two alternatives.

Answer to Question 2

B