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Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 16, Problem 4RQ
Why might it be difficult for a buyer and seller to agree on a
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Students have asked these similar questions
It is often costly to obtain the information necessary to make good decisions. Yet, your own interests can best be served by rationally weighing all options available to you. This requires informed decision making. Does this mean that making uninformed decisions is irrational? How do you determine how much information is the right amount?
As we learned in the video, Sheldon is trying to decide between purchasing an XBox and purchasing a PlayStation. Each system has its pros and cons.
Sheldon is willing to pay up to $300 for the XBox, which costs $249. He is willing to pay up to $500 for the PlayStation, which costs $499. Regardless
of which game system he buys, Sheldon plans to purchase a third-party warranty for $20. Let's calculate Sheldon's opportunity cost of purchasing
each system.
V
3rd attempt
Part 1
What is Sheldon's opportunity cost if he buys the XBox? $
Part 2
What is Sheldon's opportunity cost if he buys the PlayStation? $
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Would you
say that a sacrifice represents the cost of a particular decision?
Chapter 16 Solutions
Principles of Economics 2e
Ch. 16 - For each of the following purchases, say whether...Ch. 16 - Why is there asymmetric information in the labor...Ch. 16 - Why is it difficult to measure health outcomes?Ch. 16 - Why might it be difficult for a buyer and seller...Ch. 16 - What do economists (and used-car dealers) mean by...Ch. 16 - What are some ways a seller of goods might...Ch. 16 - What are some ways a seller of labor (that is,...Ch. 16 - What are some ways that someone looking for a loan...Ch. 16 - What is an insurance premium?Ch. 16 - In an insurance system, would you expect each...
Ch. 16 - What is an actuarially fair insurance policy?Ch. 16 - What is the problem of moral hazard?Ch. 16 - How can moral hazard lead to more costly insurance...Ch. 16 - Define deductibles, copayments, and coinsurance.Ch. 16 - How can deductibles, copayments, and coinsurance...Ch. 16 - What is the key difference between a...Ch. 16 - How might adverse selection make it difficult for...Ch. 16 - What are some of the metrics economists use to...Ch. 16 - You are on the board of directors of a private...Ch. 16 - A website offers a place for people to buy and...Ch. 16 - How do you think the problem of moral hazard might...Ch. 16 - To what sorts of customers would an insurance...Ch. 16 - Using Exercise 16.20, sketch the effects in parts...
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- How does the principle of duality influence decision-making in economics?arrow_forwardWe learned that we can use choice between a gamble over someone's best and worst outcomes and getting an outcome of interest (like getting pizza) for certain as a way to assign numeric values to utility (on a scale of 0 to 1). Using this method, if you are indifferent between the following: A gamble that has a 0.3 chance of your best possible outcome (and no lower chance), and a 0.7 chance of your worst possible outcome. Getting pizza for certain. it means that your utility for getting pizza is:arrow_forwardWhat are the likely consequences of not intervening?arrow_forward
- Evaluate the following statement. “We shouldn’t generalize from what people do in the ultimatum game because $10 is a trivial amount of money. When larger amounts of money are on the line, people will act differently.”arrow_forwardA market economy seems to be able to satisfy customers who have different tastes in cars. Whether you want a big car, small car, red car or blue car, as long as you are willing to pay for it, you can find the car you desire. But with protective services (police), the market doesn’t seem to work as well. If you want lots of police attention, or little police protection, whether you want them to carry guns or not, whether you want them to prevent drug sales or not, none of us seem to be able to get the exact protection services that we are willing to pay for. Using economic reasoning, can you explain why the market can provide for many different tastes in cars, but not for many different tastes in protective servicesarrow_forwardWhen alice went to a movie theatre last time,she had to choose between a romantic movie and action movie. Eventually she decided to watch the romantic movie. Did alice face any scarcity in this situation?arrow_forward
- On your way home from Super Groceries, your car breaks down. It is a hot summer day and you have nobody to call. With little time before the food spoils, you decide to prioritize what to carry on the walk home. You choose to take three items with you. Since you will need all five items today, you will replace the two abandoned items at the corner store near your house, Convenient Grocers. The table contains the prices you paid for each good at Super Groceries and the prices you will need to pay at Convenient Grocers to replace the goods. Which three items should you save? OOOOO vegetables fruits eggs ham milk Item milk eggs ham vegetables fruits Price at Super Groceries $3.75 $3.80 $2.95 $3.80 $2.50 Price at Convenient Grocers $4.25 $2.95 $5.25 $3.05 $3.80arrow_forwardIf a highway is made safer, the benefit is fewer deaths and injuries. Explain the following two ways that economists put a dollar value on fewer deaths and injuries: (a) revealed preference and (b) contingent valuation.arrow_forwardSuppose an insurance company wants to charge a very healthy individual a premium of $1,200 a year for health coverage. It also wants to charge a less healthy individual a premium of $3,600 a year for health coverage. It is seeking to ascertain from any given customer information regarding his/her health by asking for several pieces of health-related information, such as doctor assessments of the person’s health, history of health-related problems, etc. The opportunity cost of a very healthy person securing a health report is $250 and the opportunity cost of a less healthy person securing a health report is $650. Of the choices below, how many reports should the company request to best ensure its paying the right premium to the right person? Reconsider the previous health insurance question. Of the choices below, which one is closest to the spread between the minimum possible number of reports and the maximum possible reports to achieve the company’s desired outcome? Reconsider again…arrow_forward
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