ECONOMICS W/CONNECT+20  >C<
ECONOMICS W/CONNECT+20 >C<
20th Edition
ISBN: 9781259714993
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 8, Problem 3DQ
To determine

The heuristics.

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Your business produces two products: graphics and writing assessments. However, time is finite and your business must allocate its time between the two products. If your business is producing one service, it cannot produce the other service at the same time. Based on previous experience, you know that your firm can produce 11 graphics and 20 assessments per day. Your firm could also produce 7 graphics and 40 assessments per day. Given these production possibilities, what is the tradeoff between your two services? Make sure you estimate your tradeoff (opportunity cost) in terms of how much you receive for each unit of graphics services that you give up, that is, for 1 unit of graphics given up, how many units of assessments do you gain? Make sure to express your answer to the first decimal point.
One type of systematic error arises because people tend to think of benefits in percentage terms rather than in absolute dollar amounts. As an example, Samir is willing to drive 20 minutes out of his way to save $4 on a grocery item that costs $10 at a local market. But he is unwilling to drive 20 minutes out of his way to save $10 on a laptop that costs $400 at a local store. In percentage terms, how big is the savings on the grocery item? On the laptop? In absolute terms, how big is the savings on the grocery item? On the laptop? If Samir is willing to sacrifice 20 minutes of his time to save $4 in one case, shouldn't he also be willing to sacrifice 20 minutes of his time to save $10?
Assume you are pursuing a bachelor’s degree and you have 40 hours to divide between work and school in a week. You choose the amount of time you spend on each based on the classes you take and the hours you request at work. The degree will take you 3 years to complete if you dedicate 40 hours a week and do not take summers off. Obviously, if you devote no time to school, you never get your degree. You have been going to school full time for two quarters.  In the third quarter, you do not receive as much loan money as you anticipate and need. You decide to work 20 hours a week to make up the difference and take fewer classes. What is your opportunity cost? Make sure to include how this change will factor into the length of time it will take you to finish your degree.
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