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Dr.$Nguyen$Anh$Phuong!
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Micro _ Chapter 1 _ Practice Exercises
Part 1
1. You$have$the$afternoon$free.$You$have$a$choice$between$going$to$the$
movies$with$a$friend$or$studying$economics$for$three$hours.$If$you$go$to$
the$movies,$you$will$spend$$8.00$on$a$ticket$and$$4.50$on$popcorn.$If$you$
choose$to$study$economics$for$three$hours,$you$will$raise$your$exam$
grade$by$10$points.$
A. What$is$your$opportunity$cost$of$going$to$the$movies?$
B. What$is$your$opportunity$cost$of$studying$economics?$
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2. Debbie$quits$her$job,$which$pays$$30,000$a$year,$to$finish$her$college$
degree.$Her$annual$college$expenses$are$$10,000$for$tuition,$$2,000$for$
books,$and$$700$for$food.$What$is$her$opportunity$cost$of$attending$
college$for$the$year?$
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3. It$costs$a$company$$35,000$to$produce$700$graphing$calculators.$The$
company’s$cost$will$be$$35,070$if$it$produces$an$additional$graphing$
calculator.$The$company$is$currently$producing$700$graphing$calculators.$
A. Company’s$average$cost?$$
B. Company’s$marginal$cost?$$
C. Minimum$price$to$charge$701th$calculator?$$
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4. What$are$the$two$basic$types$of$economies?$What$is$the$main$difference$
between$a$centrally$planned$economy$and$a$market$economy?$
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5. Explain$the$concept$of$externality$and$give$an$example.$Provide$an$
example$in$which$the$government$can$help$resolve$market$failure$caused$
by$externalities.$
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6. Work$in$groups.$Explain$why$price$level$increases$if$the$government$
prints$too$much$money.$Provide$real-world$examples$that$illustrate$this$
phenomenon.$
