Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 2, Problem 3IP
(a)
To determine
The argument for working instead of studying.
(b)
To determine
Check whether the trade-off between working and grade points are reasonable.
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(Based on Chapter 2, Problem 1 of Benjamin et al., 2031) Amit has $2000 of annual non-labour income.
He has 80 hours per week that he can allocate between labour and leisure, for 80 x 52 = 4160 hours per
year. His current wage rate is $20 per hour and he chooses to work 2200 hours a year. (a) Draw a leisure -
labour diagram, clearly indicating Amit's current labour supply decision. (Your diagram should be clearly
labeled and include Amit's budget line and an indifferent curve showing his leisure and consumption of
goods and services at his optimal choice. Use the figures provided to find the y-intercept and his
consumption if he doesn't work.) (b) Amit's wage rate increases to $25 per hour. In response, he increases
his labour supply to 2300 hours. If he were "compensated" accordingly, at this new wage rate he would
be just indifferent to working 2200 hours at his original wage rate and working 2400 hours at the new
wage. Illustrate Amit's new optimal choice. Use the information…
Use the grey quadrilateral (star symbols) to shade the area representing the direct costs of attending college for four years. Then use the purple
quadrilateral (diamond symbols) to shade the area representing the opportunity cost of attending college for four years rather than entering the work
force immediately after completing high school. Finally, use the green quadrilateral (triangle symbols) to shade the area representing the difference in
earnings between college graduates and high school graduates between the ages of 22 and 34.
Hint: Be sure that the coordinates of the end points of the quadrilaterals are exactly the same as the coordinates of the areas they are to cover. Once
the quadrilateral is in place, click on it to show the value of the shaded area.
EARNINGS AND COST (Thousands of dollars)
100
80
60
College
Direct Costs
High School
20
Opportunity Cost
-20
-40
-60
-80
-100-
18
20
22
24
26
28
30
32
34
AGE (Years)
Benefits
The previous graph shows that the benefit in…
A carpenter quits his job at a furniture factory to open his own cabinetmaking business. In his first two years of operation, his sales average $100 000 per year and his operating costs for wood, workshop and tool rental, utilities, and miscellaneous expenses average $70 000 per year. Now his old job at the furniture factory is again available. What is the lowest wage at which he should decide to return to his old job? Why?
Chapter 2 Solutions
Microeconomics
Ch. 2.1 - Prob. 1QCh. 2.1 - Prob. 2QCh. 2.1 - Prob. 3QCh. 2.1 - Prob. 4QCh. 2.1 - Prob. 5QCh. 2.1 - Prob. 6QCh. 2.1 - Prob. 7QCh. 2.1 - Prob. 8QCh. 2.1 - Prob. 9QCh. 2.1 - Prob. 10Q
Ch. 2.A - Prob. 1QECh. 2.A - Prob. 2QECh. 2.A - Prob. 3QECh. 2.A - Prob. 4QECh. 2.A - Prob. 5QECh. 2.A - Prob. 6QECh. 2.A - Prob. 7QECh. 2.A - Prob. 8QECh. 2 - Prob. 1QECh. 2 - Prob. 2QECh. 2 - Prob. 3QECh. 2 - Prob. 4QECh. 2 - Prob. 5QECh. 2 - Prob. 6QECh. 2 - Prob. 7QECh. 2 - Prob. 8QECh. 2 - Prob. 9QECh. 2 - Prob. 10QECh. 2 - Prob. 11QECh. 2 - Prob. 12QECh. 2 - Prob. 1QAPCh. 2 - Prob. 2QAPCh. 2 - Prob. 3QAPCh. 2 - Prob. 4QAPCh. 2 - Prob. 5QAPCh. 2 - Prob. 1IPCh. 2 - Prob. 2IPCh. 2 - Prob. 3IPCh. 2 - Prob. 4IPCh. 2 - Prob. 5IPCh. 2 - Prob. 6IP
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