None 6. You win $100 in a basketball pool. You have a choice between spending themoney now and putting it away for a year in a bank account that pays 5 percentinterest. What is the opportunity cost of spending $100 now?

Understanding Opportunity CostOpportunity cost is a fundamental concept in economics. It represents…

Answered: 6. You win $100 in a basketball pool.…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter21: Demand: Consumer Choic

Section: Chapter Questions

Problem 14E

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Jeremy has $30 in his pocket. He would like to take his friend to a movie. The movie would cost $20 for both him and his friend. Jeremy would also like to get a new shirt. The shirt would cost him $25. If Jeremy decides to buy the shirt, what would be his opportunity cost? $25 The satisfaction of taking his friend to a movie $20 The popcorn at the movie
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Problem 3 Driving has some negative impacts such as pollution and traffic (we will see later in the course that these are examples of externalities). One approach to reducing these is to discourage driving by taxing gas. However, gas taxes tend to be unpopular with the public, as they hurt consumers financialy. A policy that some economists have proposed to avoid this downside is ' For this question, you can make the (unrealistic!) assumption that books can be divided into any decimal amount. to impose a gas tax but then return the revenue collected to consumers in the form of a tax rebate. This problem asks you to use consumer theory to demonstrate the logic behind this proposal graphically. In particular, imagine that a consumer has Cobb Douglas preferences over gas consumption and consumption of a composite good (consisting of spending on all other goods). The consumer has a fixed budget, I > 0, and the price of gas is pg > 0, while the price of the composite good is $1.
4

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6. You win $100 in a basketball pool. You have a choice between spending the money now and putting it away for a year in a bank account that pays 5 percent interest. What is the opportunity cost of spending $100 now?