Suppose student A is enrolled in a university economics class due to a supply of economic classes offered and the demand by the university administration and core curriculum requirements. He has not had a math-related class for more than 6 years due to an extreme allergic reaction which often manifests itself by a shortness of breath, fits of rage, and frequent episodes of trichotillomania. He has ten hours to study or work each day and his test scores relate to the amount of time he spends studying, as seen in the following demand schedule.
Quantity (hrs) Score (%)
0 0
1 5
2 10
3 20
4 35
5 55
6 62
7 66
8 69
9 72
10 73.5
Assume Student A is in a perfectly competitive market, answer the following questions.
A) Graph the above information. What is the optimal time to study for student A? (hint: notice the diminishing marginal product)
B) What would be the marginal benefit of studying for one more hour each day? Would it be worth it?
C) In the short run, should he stay open or should he temporarily shut down? In the long run, will he exit the market? Explain.
D) Is Economics 110 a sunk cost?
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1 comment:
This post proves that you are getting a whole lot more out of Economics than I ever did. I think I only understood one concept from everything you wrote. (My time in Econ is definitely a sunk cost!)
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