Unit 1

Question 1

For-profit businesses

Answer 1

goal is to maximize profit

Question 2

Non-profit businesses

Answer 2

goal is to maximize profits plus deliver some mission; o Deliver mission while making profits

Question 3

Individual (market)

Answer 3

goal is to maximize your happiness/utility (rational behavior to maximize utility)

Question 4

Government (market)

Answer 4

goal is to maximize power & reelection; Politicians goal is popularity to increase vote share and stay in office (reelection)

Question 5

Another name for shadow price

Answer 5

opportunity cost

Question 6

Case study: allocation of doctors time

Answer 6

Case study measuring opportunity cost for doctor’s time; later question was asked, less likely to be answered = doctor’s time is scarce

Question 7

Case study: soda tax

Answer 7

Study soda tax led to people buying more sweets; this raise the opportunity cost for soda relative to sweets (an unintended consequence)

Question 8

Case study: diabetes screening

Answer 8

If you can identify someone with diabetes in early state, it is going to be really cost-effective to intervene rather than to wait (cost opportunity) but it would be too expensive to screen every person - how often will you screen?