Answers to Review Questions 1. Your friend probably means that your tennis game will improve faster if you take solo private lessons instead of group lessons. But private lessons are also more costly than group lessons. So those people who don' t care that much about ho rapidly they improve may do better to take group lessons and spend what they save on other things 2. False. Your willingness to make the trip should depend only on whether $30 is more or less than the cost of driving downtown. 3. Because the price of a movie ticket is a cost the patron must pay explicitly, it tends to be more noticeable than the money that she would fail to earn by see ing the mov ie As Sherlock holmes recogn ized. it's easier to notice that a dog has barked than that it has failed to bark 4. Using a frequent flyer coupon for one trip usually means not having one available to use for another. Thinking of frequent-flyer travel as free therefore leads people to take some trips that they shouldn 't 5. If your tuition payment is non-refundable, it is a sunk cost. If the payment is refundable until a certain date. it is not a sunk cost before that date but becomes one after it Answers to problems 1. The economic surplus from washing your dirty car is the benefit you receive from doing so($6)minus your cost of doing the job($3.50), or $2.50 2. The benefit of add ing a pound of compost is the extra revenue you' ll get from the extra tomatoes that result. The cost of adding a pound of compost is 50 cents. B adding the fourth pound of compost you' ll get 2 extra pounds of tomatoes, or 60 cents in extra revenue, which more than covers the 50-cent cost of the extra pound of compost. But add ing the fifth pound of compost gives only 1 extra pound of tomatoes, so the corresponding revenue increase(30 cents)is less than the cost of the compost. You should add 4 pounds of compost and no more 3. In the first case, the cost is $6/week no matter how many cans you put out, so the cost of d isposing of an extra can of garbage is $0. Under the tag system, the cost of putting out an extra can is $2, regardless of the number of the cans. Since the relevant costs are higher under the tag system, we would expect this system to reduce the number of cans collectedAnswers to Review Questions 1. Your friend probably means that your tennis game will improve faster if you take solo private lessons instead of group lessons. But private lessons are also more costly than group lessons. So those people who don’t care that much about how rapidly they improve may do better to take group lessons and spend what they save on other things. 2. False. Your willingness to make the trip should depend only on whether $30 is more or less than the cost of driving downtown. 3. Because the price of a movie ticket is a cost the patron must pay explicitly, it tends to be more noticeable than the money that she would fail to earn by seeing the movie. As Sherlock Holmes recognized, it’s easier to notice that a dog has barked than that it has failed to bark. 4. Using a frequent flyer coupon for one trip usually means not having one available to use for another. Thinking of frequent-flyer travel as free therefore leads people to take some trips that they shouldn't. 5. If your tuition payment is non-refundable, it is a sunk cost. If the payment is refundable until a certain date, it is not a sunk cost before that date but becomes one after it. Answers to Problems 1. The economic surplus from washing your dirty car is the benefit you receive from doing so ($6) minus your cost of doing the job ($3.50), or $2.50. 2. The benefit of adding a pound of compost is the extra revenue you’ll get from the extra tomatoes that result. The cost of adding a pound of compost is 50 cents. By adding the fourth pound of compost you’ll get 2 extra pounds of tomatoes, or 60 cents in extra revenue, which more than covers the 50-cent cost of the extra pound of compost. But adding the fifth pound of compost gives only 1 extra pound of tomatoes, so the corresponding revenue increase (30 cents) is less than the cost of the compost. You should add 4 pounds of compost and no more. 3. In the first case, the cost is $6/week no matter how many cans you put out, so the cost of disposing of an extra can of garbage is $0. Under the tag system, the cost of putting out an extra can is $2, regardless of the number of the cans. Since the relevant costs are higher under the tag system, we would expect this system to reduce the number of cans collected