Chapter 7, Costs Video Solutions, Microeconomics

Problem 1

Executives at Leonesse Cellars, a premium winery in Southern California, were surprised to learn that shipping wine by sea to some cities in Asia was less expensive than sending it to the East Coast of the United States, so they started shipping to Asia (David Armstrong,"Discount Cargo Rates Ripe for the Taking," San Francisco Chronicle, August 28 2005 ). Because of the large U.S. trade imbalance with major Asian nations, cargo ships arrive at West Coast seaports fully loaded but return to Asia half to completely empty. Use the concept of opportunity cost to help explain the differential shipping rates.

Erin Moser

Numerade Educator

01:25

Problem 2

You have a ticket to go to a concert by one of your favorite groups, the Hives, which you cannot resell. However, you can buy a ticket for $\$ 40$ to attend a talk by Steven Colbert, which is at the same time as the concert. You are willing to pay up to $\$ 70$ to hear Colbert. Given that there are no other costs involved in attending either event, what is your opportunity cost of attending the Hives concert?

Niamat Khuda

Numerade Educator

01:33

Problem 3

"There are certain fixed costs when you own a plane,' [Andre] Agassi explained during a break in the action at the Volvo/San Francisco tennis tournament,'so the more you fly it, the more economic sense it makes..... The first flight after I bought it, I took some friends to Palm Springs for lunch." (Scott Ostler, "Andre Even Flies Like a Champ,", " San Francisco Chronicle, February $8,1993,$ C1. Discuss whether Agassi's statement is reasonable.

Niamat Khuda

Numerade Educator

04:13

Problem 4

A firm purchased copper pipes a few years ago at $\$ 6$ per pipe and stored them, using them only as the need arises. The firm could sell its remaining pipes in the market at the current price of $\$ 3 .$ What is the opportunity cost of each pipe and what is the sunk $\operatorname{cost} ?$

Oluwadamilola Ameobi

Numerade Educator