Problems
14. Consider your decision whether to go skiing for the weekend.
Suppose transportation, lift tickets, and accommodation for the
weekend cost $300. Suppose also that restaurant food for the
weekend will cost $75. Finally, suppose you have a weekend job
that you will have to miss if you go skiing, which pays you $120
(after tax) for the one weekend day that you work. What is the
opportunity cost of going skiing? Do you need any other
information before computing the opportunity cost?
15. Suppose you own an outdoor recreation company and you want
to purchase all-terrain vehicles (ATVs) for your summer business
and snowmobiles for your winter business. Your budget for new
vehicles this year is $240 000. ATVs cost $8000 each and
snowmobiles cost $12 000 each.
a. Draw the budget line for your purchase of new vehicles.
b. What is the opportunity cost of one ATV?
c. What is the opportunity cost of one snowmobile?
d. Does the opportunity cost of one ATV depend on how
many you purchase? Why or why not?
16. Suppose one factory produces residential windows and doors.
The following scenarios describe various straight-line production
possibilities boundaries for this factory. Each scenario describes
the numbers of doors that could be produced in one day if all the
factory’s resources were devoted to producing doors and the