Economics Homework Eleven Answers - Student Ten

1. If you were to loan someone money, why would you want him to pay you something extra (interest) when he pays back the loan? Give at least one reason.

Because you lost the chance to use that money for your own benefit.

Good.

2. Suppose I loaned you $1000 today, and interest rates are 5% per year (compounded annually), and you repaid the loan plus interest in 2 years, then what is the total you would pay to satisfy this debt?$1100

Nope, not quite. To "compound annually," it needs to be $1000 times 1.05, and than times 1.05 again for the next year, for a total of $1102.50. (Minus 1)

3. Review: is the cost of the bus for a trip to D.C. a "fixed cost" or a "variable cost"? Explain, assuming for the purpose of this question that one and only one bus can be used (in reality, we may have several buses).The cost of the bus is a fixed cost because we cannot get to Washington D.C. without it.

Right answer, but the reason is slightly off. The bus is a fixed cost because the cost is the same no matter how many people ride it. (Minus 1).

4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?It is most likely competition or profit since both are great motivators. Competition gives people the will to win and profit is the reward.

Superb, could be a model answer.

5. Suppose I will pay you $1000 in two years, and the interest rate is 10% per year, compounded annually. How much should you pay me today to receive $1000 in two years? Show your work. X(1.2) =$1000-----X=$1,000/1.2=$833.3 --------- 833.3*1.2=999.96

Nope, not quite. Again, you're not compounding correctly. See model answers when available. (Minus 1).

6. Pick another question from the midterm exam that you answered incorrectly, and explain the correct answer.

Proper skip here.

48/50. Well done!--Andy Schlafly 20:11, 5 December 2009 (EST)