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Lecture

Department

EconomicsCourse Code

ECO206Y1Professor

Gordon ClevelandThis

**preview**shows pages 1-2. to view the full**6 pages of the document.**TUTORIALS

Your tutorials are scheduled on the same day each week (different days for different

students). Tutorial questions are printed below.

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ECM A04H

TUTORIAL #1 (WEEK 2)

1. What is the opportunity cost to you of going to Economics class?

The implicit costs are my time, loss of wages from job that I could have been

doing instead. Instead of going to class I could be going out with friends or

playing. The explicit(direct) cost would be money because I paid to go to this

class.

2. What is the opportunity cost to you of getting a university education?

The implicit costs are my time and what I could have been doing instead of going

to university. I could be getting a paying job instead and earn income for the

time. The explicit costs are tuition. Must measure opportunity cost in terms of

money for both implicit and explicit costs. Measure time in dollars.

3. What is the opportunity cost to you of taking a part-time job during the school

year?

The implicit cost would be my time and the fact that I could be studying to

increased my grades for university. The explicit costs would be the money that I

make during my part time job. Value of grades dropping in dollars to compare to

the wages I make from my job.

4. Assume that Jane lives in a single-person economy and is only able to produce

juice (Y) and nuts (X). Her Production Possibilities Frontier for one month's

production can be described by the function:

Y = 400 - 30X - X20 ≤X≤10

(a) What is the maximum amount of juice (in litres) that she could

produce? What is the maximum amount of nuts (in kilos) that she

could produce? The maximum number of the produce X is 10 and the

max number of produce Y is 400 (y- intercept).

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

(b) Why do we restrict X to lie in the interval (0,10) when we write the

PPF as a function? We restrict X to lie in the interval (0, 10) because all

other values less than 0 are in the negative region and 10 is the

maximum number of the nut produce that are available.

(c) Is the point (5, 100) [i.e., X=5, Y=100] an efficient amount of production

for Jane? Why or why not? This is not an efficient amount of production

because when X is 5, there can be 225 units of Y. So, she is not using her

resources well.

(d) Sketch the PPF. Divide the diagram into three sets, as follows: points that

are attainable but inefficient; points that are attainable and efficient; points

that are unattainable.

(e) What is the opportunity cost of nuts at (4, 264)? What is the opportunity

cost of juice at the same point? Repeat both questions at (8,96). How are

these costs related to calculus concepts that you have learned? How are they

related to geometric properties of the graph that you have sketched?

(queston will be on exam)***

The opportunity cost of nuts = -dY/dX = - (-30 – 2x) = 30 + 2X

Opportunity cost of juice = -dX/dY = 1/(30 + 2X) (inverse)

For point (4, 264)

-dY/dX = 30 + 24 = 38L of juice

-dXdY = 1/ (30 + 2X) = 1/38 Kilos of nuts

Therefore the opportunity 38L of juice is 1/38Kilos of nuts.

For point (8, 96)

-dY/dX = 30 + 2X = 30 + 16 = 46L of juice

-dX/dY = 1/(30 + 2X) = 1/46 Kilos of nuts

The opportunity cost of 46L of juice is 1/46 kilos of nuts.

Theses costs are related to calculus concepts that I have learned because it

involves maximizing profit. They also relate to the properties of graphs because I

need to know things such as the zeros, intercepts, shapes of graphs and max/min

point. The slope of the tangent is the opportunity cost.

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