Economics - Tutorial Answers

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1 Managerial Economics 2010 Answers to All Tutorial Questions Topic 1 : What is managerial economics Questions from Chapter 1 of the Text (McTaggart, Findlay & Parkin) Review Question 1 (pp. 4) List some examples of scarcity in Australia today. An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both life-saving (or life-enhancing) medicine and food. At a more student-oriented level, examples of scarcity include not enough income to afford both tuition and a nice car, and not enough learning capacity to study for both an Economics exam and a…show more content…
If the marginal benefit of an action exceeds its marginal cost, then the decision maker should undertake the action because the benefit of the action exceeds its cost and adds to net benefit. Conversely, if the marginal benefit is less than the marginal cost, then the decision maker should not undertake the action because the benefits of the action fall short of its costs and detract from net benefit. 3 Problems and Applications Question 2 (pp. 16) Which of the following pairs does not match: a. Labour and wages? Labour earns wages, so this pair matches. b. Land and rent? Land earns rent, so this pair matches. c. Entrepreneurship and profit? Entrepreneurship earns profit, so this pair matches. d. Capital and profit? Capital earns interest, so this pair does not match. Question 4 (pp. 16) The night before a test, you decide to go to the movies instead of staying home and working your MyEconLab Study Plan. You get 50 percent on your test compared with the 70 percent that you normally score. a. Did you face a tradeoff? Yes, you faced a tradeoff. The tradeoff was between a higher test score and an evening with your friends at the movies. b. What was the opportunity cost of your evening at the movies? The opportunity cost of going to the movies is the fall in your grade. That is the 20 points forgone from choosing to see the movie rather than study. Question 8 (pp. 16) How would you classify a

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