M4. Rani lives and works in downtown Toronto. She pays $500 a week in rent. Her job pays her $20 an hour. She can choose how many hours to work a week, but she has to be present in the office to do her job. She works in the same building that she lives so her commuting time is zero. a) If she does not rent her current apartment, she could rent an apartment in Guelph for $300 a week but will need to spend 3 hours a day (total) commuting to downtown Toronto, 5 days a week. Assume Rani values both apartments and living situations the same. What is Rani's Opportunity Cost of renting her current apartment in downtown Toronto? Explain your reasoning clearly and show all the steps in your working. b) Suppose Rani's wage decreases. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working. c) Suppose Rani's job moves online. She is no longer required to be present in the office to do her job. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working. d) Suppose Rani inherits an apartment in Guelph that is similar to the one she would rent if she lived in Guelph. Living in it costs her nothing. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working.
M4. Rani lives and works in downtown Toronto. She pays $500 a week in rent. Her job pays her $20 an hour. She can choose how many hours to work a week, but she has to be present in the office to do her job. She works in the same building that she lives so her commuting time is zero. a) If she does not rent her current apartment, she could rent an apartment in Guelph for $300 a week but will need to spend 3 hours a day (total) commuting to downtown Toronto, 5 days a week. Assume Rani values both apartments and living situations the same. What is Rani's Opportunity Cost of renting her current apartment in downtown Toronto? Explain your reasoning clearly and show all the steps in your working. b) Suppose Rani's wage decreases. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working. c) Suppose Rani's job moves online. She is no longer required to be present in the office to do her job. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working. d) Suppose Rani inherits an apartment in Guelph that is similar to the one she would rent if she lived in Guelph. Living in it costs her nothing. Does this affect her decision to live in Toronto? Explain your reasoning clearly and show all the steps in your working.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:M4. Rani lives and works in downtown Toronto. She pays $500 a week in
rent.
Her job pays her $20 an hour. She can choose how many hours to work a
week, but she has to be present in the office to do her job. She works in the
same building that she lives so her commuting time is zero.
a) If she does not rent her current apartment, she could rent an
apartment in Guelph for $300 a week but will need to spend 3 hours
a day (total) commuting to downtown Toronto, 5 days a week.
Assume Rani values both apartments and living situations the same.
What is Rani's Opportunity Cost of renting her current apartment in
downtown Toronto? Explain your reasoning clearly and show all the
steps in your working..
b) Suppose Rani's wage decreases. Does this affect her decision to
live in Toronto? Explain your reasoning clearly and show all the
steps in your working.
c) Suppose Rani's job moves online. She is no longer required to be
present in the office to do her job. Does this affect her decision to
live in Toronto? Explain your reasoning clearly and show all the
steps in your working.
d) Suppose Rani inherits an apartment in Guelph that is similar to the
one she would rent if she lived in Guelph. Living in it costs her
nothing. Does this affect her decision to live in Toronto? Explain
your reasoning clearly and show all the steps in your working.
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