Economics Homework Eleven Answers - Student Sixteen

Economics lecture 11 James G.

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.

A. I would want him to give me interest because I am doing him a service by letting him use my money. Interest is a way of paying me for this service.

Right.

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?

A. To repay my dept I would give you $1102.50.

Correct!

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).

A. The bus for the D.C. trip I believe is truthfully a variable cost because we don’t really need a bus, we want it. If we wanted to we could all just drive down to D.C. ourselves. The bus is there to encourage more people to come on the trip, not be the basis for the trip.

Well, I guess everyone could drive separately, but the question asked you to assume that "only one bus can be used." With that assumption, it is a variable cost. (Minus 1).

4. Which concept in Economics do you think is the best self-motivator, which you might use to achieve more?

A. The phrase “time is money”. The basis of all America’s achievements can be found in this idea. Great people spent their time working hard to achieve their goals in life, not sitting around just waiting for success to fall into their laps.

Superb.

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.

A. The answer can be found by dividing $1000 by 1.10 twice to find the answer, $826.45.

Excellent.

Terrific work! 49/50.--Andy Schlafly 22:07, 5 December 2009 (EST)