Business 305
Module 1 Case

1. What do economists mean when they say that there is no such thing as a free lunch?
When economists say there is no such thing as free lunch there are saying that everything come with a cost. The product that is been given out for free the resources that was use to produce it was not given to them for free. Let’s take a gift bag that is given when you purchases a perfume set. That gift bag has been made with resources that were bought to produce that product. The saying there is no such thing as free lunch reefers to this. 2. Suppose that your tuition to attend college is $14,000 per year and you spend $5,000 per year on room and board. If you were working full time, you could earn $26,000 per year. What is your opportunity cost of attending college? How does a college education increase one’s human capital?
The opportunity cost of attending college is that you are losing out on making the 26,000 per year working a full time job. But as you attend college you are investing in yourself and your future. When you finish college you will make for then the full time job that you have could have been working. The return from the investment of going to college is greater and increases the overall human capital in the long run.

3. When a firm hired its tenth worker, its factory output increased by four units per month. Would you expect the firm's output to increase by eight more units per month if the firm hired two more workers?
According to Principle of Diminishing you will have increased in production by just adding two more workers. The logic thinking behind this is that the two extra workers will work at the same pace as the rest of the employees to produce the extra eight units. If one of the workers does not work at the pace as the others the units could be less. At the end there will be an increased in production. 4. Graphing Question. Use the graph to answer the questions below:
a. What is the opportunity cost of increasing production of manufactured products from 500 tons to 600 tons per year? (in terms of agricultural products)
With an increase in production from 500 to 600 tons of manufactured per year will show when resources are fully being use and manufactured products will be right on target with the agricultural products. There will be no loss in agricultural products only an increase.
b. What is the maximum amount of manufactured products that can be produced?
The maximum amount of manufactured products is about 675 tons manufactured products and at about 50 to 75 tons of agricultural products
c. What can be said about points outside the curve? How can these points be achieved?
The points that are outside the curve are desirable because it produces more products for both. But it is unattainable to the amount of resources that are available. To achieve this there has to be an increase in the resource for both.