PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 5RQ
To determine
Explain whether the tuition fee is a sunk cost.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Instructions: Enter your responses as whole numbers.
a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work?
After 5 years, the total value of…
Joanne has just completed high school and is trying to determine whether to go to junior college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $22,000 per year for each of the next five years. If she goes to junior college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from junior college, in each of the subsequent three years, her wages will be $41,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Instructions: Enter your responses as whole numbers.
a. Suppose, for simplicity, that Joanne can borrow and lend at 0 percent interest. On purely economic grounds, should she go to junior college or work?
After 5 years, the total value of…
Suppose that before you began your college application process, you were offered a job to work as a floor-trainer at a local climbing gym, accompanied by a yearly salary of $30,000 (after taxes). Assume however that you decided to turn down this offer and instead attend a year of college. The total monetary cost of the year of college, including tuition, fees, and room and board expenses, is $42,000.
You likely chose to attend college because
Chapter 1 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Knowledge Booster
Similar questions
- Paolo lives in Philadelphia and operates a small company selling scooters. On average, he receives $712,000 per year from selling scooters. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $412,000. He also pays several utility companies, as well as his employees wages totaling $269,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $1,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Paolo does not operate the scooter business, he can work as a nurse and earn a yearly salary of $21,000 with no additional monetary costs, and rent out his storefront at the $1,000 per year rate. There are no other costs faced by Paolo in running this scooter company. (Questions in images)arrow_forwardAntonio is a researcher who teaches thermodynamics at a university where he earns an annual salary of $160,000. He intends to take the next year off to focus on writing a new undergraduate physics textbook, so he will not earn any income next year. He is currently deciding how much of this year's salary he should save for next year. Assume that there are no tax implications associated with the decision, and ignore what happens after next year. Therefore, next year Antonio will consume whatever he saves this year plus interest, and he is not concerned with the future beyond next year. The following graph shows Antonio's preferences for consumption this year and next year. Suppose initially Antonio cannot earn interest on the money he saves. Use the green line (triangle symbol) to plot Antonio's budget constraint (BC₁) on the following graph. Then use the black point (plus symbol) to show his optimum consumption bundle. Note: Dashed drop lines will automatically extend to both axes.…arrow_forwardSuppose you currently earn $40,000 a year. You are considering a job that will increase your lifetime earnings by $400,000 but that requires an MBA. The job will mean also attending business school full time for two years at an annual cost of $50,000. You already have a bachelor’s degree, for which you spent $150,000 in tuition and books. Which of the above information is relevant to your decision on whether to take the job? What is the opportunity cost of going to school to study MBA? Should you take the job? [Note: You will need to get the MBA]arrow_forward
- Sarah, Alicia, and Philip all lost their jobs when the technology start-up they worked for was acquired by another company. After a few weeks of searching for another full-time job, Sarah decided to go back to school to get an LPN certification. In order to finish as fast as possible, Sarah chose not to work while finishing the certification. Alicia took a part-time job in retail shortly after losing her job, but she continues to search diligently for full-time work. Philip searched for a job for the first five weeks after being laid off, but as bills began piling up, he found himself moving into his parents’ basement. He recently gave up looking for work because he figures that there just aren’t jobs available right now so there is no point looking. Are Sarah, Alicia, and Philip unemployed, employed, or not in the labor force? Would any of the three be considered a discouraged worker? How would each contribute to the unemployment rate?arrow_forwardSuppose the marginal benefit of writing a contract is $100, independent of its length. Find the optimal contract length when the marginal cost of writing a contract of length L is: (LO3) a. MC(L) = 30 + 4L. b. MC(L) = 40 + 5L. c. What happens to the optimal contract length when the marginal cost of writing a contract declines?arrow_forwardNick is considering quitting his current job as an electrician and following his lifelong dream of opening a restaurant. This decision requires careful analysis and evaluation. If he chooses to do this, he would have to quit his current job, which pays $70,000 a year, and take over a building that he owns and currently rents out for $12,000 a year. His expenses at the restaurant would be $100,000 for food and $8,000 for gas and electricity. Nick should go ahead and quit current job and implement his plans only if the projected revenue is equal or greater than a $12,000 b $82,000 c $108,000 d $190,000 e $70,000arrow_forward
- Suppose you currently earn $30,000 a year. You are considering a job that will increase your lifetime earnings by $300,000 but that requires an MBA. The job will mean also attending business school for two years at an annual cost of $25,000. You already have a bachelor’s degree, for which you spent $80,000 in tuition and books. Which of the above information is relevant to your decision on whether to take the job?arrow_forwardJonathon and his family were negotiating a lease for commercial premises to be used for their Italian restaurant. Part of the negotiation concerned the ability of Jonathon to demolish a wall in order to remodel the interior and build a pizza oven. The landlord shook Jonathon’s hand and told him they had a deal and that he could go ahead and get started. Jonathon took out a large bank loan to finance the remodelling. Four weeks later, Jonathon received a letter from the landlord indicating that he did not intend to proceed with the lease. Jonathon has already spent $100,000 on the remodelling but he has not received a signed a lease as yet. Since there is no breach of contract, does Jonathon have any other recourse in equity?arrow_forwardManuel lives in Dallas and operates a small company selling drones. On average, he receives $778,000 per year from selling drones. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $462,000. He also pays several utility companies, as well as his employees wages totaling $257,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $12,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Manuel does not operate the drone business, he can work as a blogger and earn a yearly salary of $50,000 with no additional monetary costs, and rent out his storefront at the $12,000 per year rate. There are no other costs faced by Manuel in running this drone company. Identify each of Manuel’s costs in the following table as either an implicit cost or an explicit cost of selling drones. Implicit Cost Explicit Cost The wholesale cost for the…arrow_forward
- Sam lives in San Diego and operates a small company selling bikes. On average, he receives $694,000 per year from selling bikes. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $392,000. He also pays several utility companies, as well as his employees wages totaling $289,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $2,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Sam does not operate the bike business, he can work as a programmer and earn a yearly salary of $20,000 with no additional monetary costs, and rent out his storefront at the $2,000 per year rate. There are no other costs faced by Sam in running this bike company. Identify each of Sam’s costs in the following table as either an implicit cost or an explicit cost of selling bikes. Implicit Cost Explicit Cost The wages that Sam pays The…arrow_forwardSuppose you buy an accessory that will be used in your production activity and is worth a thousand of pesos (P1,000.00). In economic perspective, would you contend that is the only cost involved? Why or why not?arrow_forwardOver the past decade, holiday gift cards have become increasingly popular at online retailers. Not long ago, online shoppers had to really hunt at most e-retailers’ sites to purchase a gift certificate, but today it is easier to purchase gift cards online than at traditional retail outlets. Do you think online gift cards are merely a fad? Explain carefully. (LO6)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education