Module 2 Assignment: Problem Set — Choice in a World of Scarcity

Click on the following link to download the problem set for this module: Choice in a World of Scarcity Problem Set.

Choice in a World of Scarcity Problem Set[1]

Use the following information to answer questions 1 through 8:

A student has a monthly budget of $120 to spend on either burritos, which cost $6 each, or sodas, which cost $4 each.

  1. What is the largest number of burritos that the student could afford to purchase in one month?
  2. What is the largest number of sodas the student could afford to purchase in one month?
  3. Draw the student’s budget constraint. Put burritos on the x-axis and sodas on the y-axis.

A blank coordinate plane with x and y axes increasing by units of 10.

  1. Which combinations of burritos and sodas are unaffordable–those to the left of the line in the graph or those above the line in the graph? Why?

 

  1. Which combinations would leave some budget unspent – those to the left of the line in the above graph or those to the right of the line in the above graph?

 

  1. What is the equation for the student’s budget constraint? In your equation, use Q1 as the variable to represent the quantity of burritos and Q2 to represent the quantity of sodas.
  2. What is the opportunity cost of a burrito?
  3. What is the opportunity cost of a soda?
  4. The local farmer’s market offers 1 bag of cilantro for $6 or 2 bags for $10. What’s the marginal cost of the second bag?

Use the following information to answer questions 10 through 12:

Suppose the relationship between your study time and your grade on a History midterm is given by the following table:

If you study for Your grade will be
4 hours 80
5 hours 90
6 hours 93
  1. What is the “marginal grade improvement (MGI)” of the 5th hour of studying?
  2. What is the “marginal grade improvement (MGI)” of the 6th hour of studying?
  3. Why might the MGI be diminishing?

 

[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.