Economics~ Classwork 8/20/13

Content Building for Chapter 1

1. Define these terms:

• Incentives 
• Utility 
• Opportunity Cost 
• Cost Benefit Analysis 
• Marginal Cost 
• Marginal Benefit

2. What is the difference between a trade-off and an opportunity cost?
3. Explain the relationship of marginal cost and marginal benefit?
4. Consider the following scenario:

Your family is taking week long summer vacation at a cabin in the mountains next to a lake. You have been able to get time off work at the job where you normally work 40-hours a week at $12 per hour. Your parents are paying $1,500 for the cabin rental and each child will pay $200 for food and other related costs. You currently have your own rented apartment with a monthly rent of $300 and typically pay $75 per week for food. The travel cost to get to the cabin and back will cost you $50 more than your usual weekly travel expenses.

What is your marginal costs of the summer vacation?

What is your marginal benefit of the summer vacation?