Chapter 1 Question
Review questions
1.
When someone on a good income says that they ‘can't afford’ a plasma screen television, what do they really mean? [LO 4]
2.
A friend of yours says, ‘Private tennis lessons are definitely better than group lessons.’ Explain what you think they mean by this statement. Then use the cost–benefit principle to explain why private lessons are not necessarily the best choice for everyone. [LO 4]
3.
Which is more valuable: saving $100 on a $2000 plane ticket to Tokyo or saving $90 on a $200 plane ticket to Brisbane? [LO 6]
4.
Why might someone who is trying to decide whether to see a movie be more likely to focus on the $12 ticket price than on the $20 they would fail to earn by not babysitting that night? In what sense is the $20 like a dog that fails to bark in the night? [LO 6]
5.
You receive a CD gift voucher for your birthday and use it to buy the Black Eyed Peas' latest album. Are you right when you tell a friend that the album was free since you didn't have to pay a cent for it? [LO 6]
6.
Is the non-refundable tuition fee payment you made to your university this semester a sunk cost? How would your answer differ if your university were to offer a full tuition fee refund to any student who dropped out during the first four weeks of the semester? [LO 6]
7.
You currently go to the gym three times a week. Each visit costs you $15. You get $90 worth of benefit from your weekly gym routine. Does this mean that you should go to the gym more often than three times a week? Explain. [LO 6]
8.
‘Identify one of the pitfalls of cost–benefit thinking that can help to explain why farmers might choose to harvest trees growing along the banks of a stream that runs across their land. Explain why acknowledging pitfall 6 might encourage this behaviour’ [LO 6]
Problems
1.
The most you would be willing to pay for having a freshly washed car before going out on a date is $6. The smallest amount you would accept to wash someone else's car is
1.
When someone on a good income says that they ‘can't afford’ a plasma screen television, what do they really mean? [LO 4]
2.
A friend of yours says, ‘Private tennis lessons are definitely better than group lessons.’ Explain what you think they mean by this statement. Then use the cost–benefit principle to explain why private lessons are not necessarily the best choice for everyone. [LO 4]
3.
Which is more valuable: saving $100 on a $2000 plane ticket to Tokyo or saving $90 on a $200 plane ticket to Brisbane? [LO 6]
4.
Why might someone who is trying to decide whether to see a movie be more likely to focus on the $12 ticket price than on the $20 they would fail to earn by not babysitting that night? In what sense is the $20 like a dog that fails to bark in the night? [LO 6]
5.
You receive a CD gift voucher for your birthday and use it to buy the Black Eyed Peas' latest album. Are you right when you tell a friend that the album was free since you didn't have to pay a cent for it? [LO 6]
6.
Is the non-refundable tuition fee payment you made to your university this semester a sunk cost? How would your answer differ if your university were to offer a full tuition fee refund to any student who dropped out during the first four weeks of the semester? [LO 6]
7.
You currently go to the gym three times a week. Each visit costs you $15. You get $90 worth of benefit from your weekly gym routine. Does this mean that you should go to the gym more often than three times a week? Explain. [LO 6]
8.
‘Identify one of the pitfalls of cost–benefit thinking that can help to explain why farmers might choose to harvest trees growing along the banks of a stream that runs across their land. Explain why acknowledging pitfall 6 might encourage this behaviour’ [LO 6]
Problems
1.
The most you would be willing to pay for having a freshly washed car before going out on a date is $6. The smallest amount you would accept to wash someone else's car is