2. Determining opportunity cost Suppose that Ciana is deciding whether or not to buy a pair of sandals that she has been researching online, and also the best place to make her purchase. Three different stores in the area sell the sandals she likes, but some stores are more convenient for Ciana to reach than others. One option is her local shoe store located only 15 minutes away from where she works, where they charge a marked-up price of $122 for the sandals: Travel Time Each Way Price of a Sandals Store (Minutes) (Dollars per sandals) Local Shoe Store 15 122 Different Neighborhood in Town 30 105 Rural Outlet 60 75 Ciana earns an hourly wage of $26 at her job. In order to purchase her sandals she will have to take time off work, so each hour away from her job costs her $26 in lost income. Assume that Ciana's travel time is the same each way (to and from the store) and that it will take her 30 minutes once she reaches a store to complete her shopping. Assume throughout the question that Ciana incurs no additional costs other than the sandals, such as gas. Complete the following table by computing the opportunity cost of Ciana's time and the total cost of shopping at each location. Opportunity Cost of Time Price of a Sandals Total Cost Store (Dollars) (Dollars per sandals) (Dollars) Local Shoe Store 122 Different Neighborhood in Town 105 Rural Outlet 75Complete the following table by computing the opportunity cost of Ciana's time and the total cost of shopping at each location. Opportunity Cost of Time Price of a Sandals Total Cost Store (Dollars) (Dollars per sandals) (Dollars) Local Shoe Store 2 Different Neighborhood in Town local shoe store Rural DUtIEt store in the different neighborhood in town ' rural outlet Assume that Ciana considers both her -n making her shopping decision. Ciana will minimize her cost of buying the sandals if she shops at the V . 4. A decision at the margin Suppose that Maris is a diligent third-year college student. One Wednesday, she decides to start the day by working through 300 sample multlple choice problems to study for her statistics class. She starts work at 7:00 AM and uses a table to keep track of her progress throughout the day. She notices that as she the hours pass, it takes her more tlme to solve the problems. Time Total Problems Solved 7:00 AM 0 8:00 AM 120 9:00 AM 210 10:00 AM 270 11:00 AM 300 Use t e ta e to answer t e o owmg questions. The marginal, or additional, gain from Maris's first hour spent working, from 7:00 AM to 8:00 AM, is':, problems. The marginal gain from Maris's third hour spent working, from 9:00 AM to 10:00 AM, is :l problems. The following week, Maris's statistics faculty advisor gives her some advice. In all their years of teaching they claim to observe that working on 75 multiple choice questions boosts a student's test score by about the same amount as spending an hour reviewing lecture notes. For simplicity, assume students are able to review lecture notes at a constant pace during each hour spent studying. Given this information, in order to use her 4 hours of time spent studying to get the highest possible test score, how many hours should she have spent solving multiple choice problems, and how many hours should she have spent reviewing lecture notes? 0 0 hours working on problems, 4 hours reading 0 2 hours working on problems, 2 hours reading 0 3 hours working on problems, 1 hour reading 0 4 hours working on problems, 0 hours reading 6. Scarcity, opportunity cost, and marginal analysis Yvette is training for a biathlon, a winter racing sport that combines cross-country skiing and rifle shooting. Consider the following scenario: Yvette has only 15 hours available to devote to her training this week. Each hour she spends skiing is one hour that cannot be spent working onher shooting. Which basic principle of individual choice do these statements best illustrate? O Yvette can use time most efficiently by spending the same amounts of time on skiing and shooting. O Yvette has an incentive to spend more time on skiing than on shooting. O People usually exploit opportunities to make themselves better off. O People face trade-offs.7. The interaction of individual choices In the aftermath of a hurricane bringing widespread damage to an area, home improvement stores were completely out of generators. Within the week, however, emergency deliveries supplied additional generators, and everyone who wished to purchase one was able to do so. Which of the following principles of economic interaction best describes this scenario? O All costs are opportunity costs. O Markets allocate goods effectively. When markets do not achieve efficiency, government intervention can improve overall welfare. O There are gains from trade.8. Property rights and market failures Musicians are much _ likely to supply recordings to the market if property rights are enforced. less Public policy can imp onomic efficiency in the presence of market failures. more Complete the following table by classifying the source of market failure in each case. Market Market Failure Power Externality A student using an e-cigarette in a library emits clouds of vapor that disrupt others working close to them. O O A single gas station has exclusive rights to operate along a private toll-road. As a result, the company can set the O O price of gasoline.9. Factors that influence standard of living Which of the following government policies is least likely to increase the standard of living in the United States? 0 Investment in education and skills training for workers 0 Investment in tools and capital for workers 0 Raising the minimum wage paid to workers 0 Investment in technology