E4P - Tutorial 2

If the price of child care is $24 per hour, how many hours of child care should Rob purchase?

• 1 hour

• 2 hours

• 3 hours

• 4 hours

Answer explanation

Rob should purchase 2 hours of child care, as the price is $24 per hour. This choice allows for a total cost of $48, which is a reasonable amount for child care.

What is the marginal benefit Rob receives for the first hour of child care?

• $14

• $20

• $30

• $32

Answer explanation

Rob's marginal benefit for the first hour of child care is $32, which represents the additional value he gains from that hour compared to other options. This is the highest value among the choices provided.

According to the Rational Rule for Buyers, why should Rob purchase the second hour of child care?

• The marginal benefit is less than the price.

• The marginal benefit equals the price.

• The marginal benefit exceeds the price.

• The marginal benefit is zero.

Answer explanation

Rob should purchase the second hour of child care because the marginal benefit exceeds the price. This means that the additional satisfaction or value he gains from the second hour is greater than what he has to pay for it.

What is the marginal benefit for the third hour of child care?

• $14

• $20

• $30

• $32

Answer explanation

The marginal benefit for the third hour of child care is $20, as it represents the additional value gained from that hour compared to the previous hours. This is the correct choice among the options provided.

If the price of child care is $18 per hour, how many hours should Rob purchase?

• 1 hour

• 2 hours

• 3 hours

• 4 hours

Answer explanation

Rob should purchase 3 hours of child care, as this option provides a balance between cost and time, totaling $54, which is reasonable for extended care.

What happens if Rob continues to buy the third hour when the price is $24?

• The marginal benefit is greater than the price.

• The marginal benefit is equal to the price.

• The marginal benefit is less than the price.

• The marginal benefit is zero.

Answer explanation

If Rob continues to buy the third hour at $24, it indicates that the marginal benefit he receives from that hour is less than the price he pays, making it an inefficient choice.

What is the marginal benefit for the fourth hour of child care?

• $14

• $20

• $30

• $32

Answer explanation

The marginal benefit for the fourth hour of child care is $14, which indicates the additional value or satisfaction gained from that specific hour compared to the previous hours.

What happens to the demand for coffee if average hourly wages increase in Australia?

• Demand increases

• Demand decreases

• Demand stays the same

• Demand disappears

Answer explanation

As average hourly wages increase in Australia, consumers have more disposable income, leading to higher demand for goods like coffee. Therefore, the demand for coffee increases.

What is the effect on coffee demand if cafes post warnings about cancer-causing components?

• Demand increases

• Demand decreases

• Demand stays the same

• Demand doubles

Answer explanation

If cafes post warnings about cancer-causing components, consumer concern is likely to rise, leading to a decrease in coffee demand as people may choose to avoid potential health risks.

How does the demand for coffee change if cafes increase the price to pay baristas more?

• Demand increases

• Demand decreases

• Demand stays the same

• Demand triples

Answer explanation

When cafes increase prices to pay baristas more, consumers may buy less coffee due to higher costs, leading to a decrease in demand. Thus, the correct answer is that demand decreases.