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Chapter 3 Review Questions.docx

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Department
Economics
Course
ECO105Y1
Professor
Paul Cohen
Semester
Fall

Description
Chapter 3: Show Me the Money (The Law of Supply) 3.1- Explain why marginal costs are ultimately opportunity costs 3.2- Define sunk costs and explain why they do no influence smart, forward-looking decisions. 3.3-Decreibe the relationship between price and quantity supplied, and identify the roles of higher profits and marginal opportunity costs of production. 3.4- Explain the difference between a change in quantity supplied and a change in supply, and list all five factors that change supply. 3.5- Explain Elasticity of supply and how it helps businesses avoid disappointed customers. 3.1 What does it really cost? Costs are Opportunity Costs 1. What is the real cost to a business of hiring or purchasing any input? 2. Microsoft released a limited supply of Xbox 360’s in 2005 with a list price— or “real” price of--$400. The unit’s immediately started selling on eBay and other online auction websites for far more than $400. What do you think determined the “real” price of an Xbox? 3. If a recession makes it much harder for workers to find better-paying jobs, what might happen to Paola’s labor costs? 3.2 Forget it, it’s History: Sunk Costs Don’t matter For Future Choices 1. What aren’t sunk costs part of opportunity costs of forward-looking decisions? 2. Suppose you have just paid your bus fare. A friend in a car pull up and offers you a ride. Explain how you would decide between staying on the bus or taking the ride, and the influence of the paid fare. 3. If you bought a $100 for a coarse, and then dropped out after the tuition refund date, is that $100 a sunk cost? Explain your answer. 3.3 More for More Money: The Law of Supply 1. What does Paola need a higher price to be willi
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