We had a "take home quiz" due at 5pm today for economics. Most students thought the questions were hard because they forced us to think about the concepts we've learned and to apply them in different ways. As one student said to our professor afterwards, "I am glad you gave it to us."
I too thought the questions were hard, but do-able. While answering the last question on supply and demand curves for a particular toy during Christmas season, I had to redraw my curves multiple times. (Hint: Since the quantity supplied of the Barbie Volkswagen Beetle remains the same as we approach the Christmas season, the supply curve cannot possibly be upward sloping, rather it is a vertical line.)
Now for fun, I am going to include something that Robert H. Frank wrote in his column in today's New York Times. I will have the answer to his questoin after the jump.
Virtually all economists consider opportunity cost a central concept. Yet a recent study by Paul J. Ferraro and Laura O. Taylor of Georgia State University suggests that most professional economists may not really understand it. At the 2005 annual meetings of the American Economic Association, the researchers asked almost 200 professional economists to answer this question:
"You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50."
Posts
1 comment:
From Frank's column:
"The opportunity cost of seeing Clapton is the total value of everything you must sacrifice to attend his concert - namely, the value to you of attending the Dylan concert. That value is $10 - the difference between the $50 that seeing his concert would be worth to you and the $40 you would have to pay for a ticket. So the unambiguously correct answer to the question is $10. Yet only 21.6 percent of the professional economists surveyed chose that answer, a smaller percentage than if they had chosen randomly."
Post a Comment