Radboud University Nijmegen

Nijmegen School of Management

2021-2022 Academic Year

Semester 1, Block 1

Assignment 1:

Introduction to economics and Business for Economics

Part 1: Home assignment

Mart Rietman

1. Let's assume that you got your lunch for free (meaning that you didn't have to pay
for it). Then there are still costs attached to the consumption of your meal, namely,
the time it takes to eat your lunch. And time is not something we have an endless
supply of and is therefore scarce. Also, this time could've been used to do something
else, such as reading a book. Something which you are now missing out on because
you are eating your lunch, opportunity costs. Therefore, there is no such thing as a
free meal.
2. The definition used by The Economy is the benefit of your next best alternative to
action x. The definition used by Principles of Microeconomics is the explicit and the
implicit costs of an action. The difference being that the latter definition uses both
explicit and implicit costs instead of only implicit. Using the first definition your
opportunity costs for going to the gym are $7, -. And the opportunity costs for going
to the gym using the second definition are 7+7=14, -.
3. If the average income in a given country rises, your time becomes more valuable
seeing as instead of doing thing x you could've been working, therefore the
opportunity costs rise and since having children is very time-consuming the costs of
having them rises and woman will have fewer children. Since a higher education
leads to higher production and therefore higher salary, woman will be incentivized to
choose the education and won't be able to have a child leading to a decline in fertility.
4. If you were to increase the income taxes, the costs of your next best alternative
action (working) increase and henceforth decreases your opportunity costs, making
you more inclined to do something other than working. By an increase in income
taxes the additional benefits of an activity compared to the additional costs of that
same additional activity will be lower making it less valuable to work as much.
5. Let's say this company makes product A and product B. If the company is making X amount
of product A it means it can't produce the maximum amount possible of product B. The
amount of product B that is sacrificed to make product A are the opportunity costs and vice
versa. If the company is able to produce two different products it has different departments
that are more specialized in producing one of the two products and is less sufficient in
producing the other product. So, if we want to make more of product A, we would be
sacrificing more and more of product B for every extra product A, thus chancing the
opportunity costs.
6. A) By looking at how many hours of work someone is willing to sacrifice in order to have X
amount of free time. Then X amount of free time is worth his payment per hour times the
number of workhours he is willing to sacrifice.
 B) By calculating what amount of money wasn't being spend in the economy because of the
pandemic restrictions.
7. A) You should develop the app for IOS since you already own the license for the IOS app
therefore there are no explicit costs, making the opportunity costs for the IOS app (12,000-
5,000=7,000$) lower than with the Android app (5,000+13,000=18,000).
B) The opportunity costs for the IOS app are now: 12,000-5,000+8,000=15,000$. And the
opportunity costs of the Android app are now: 5,000+13,000-8,000=10,000$ Since the
Android app has lower opportunity costs you should make the Android app.
8. It's possible that the explicit and implicit costs of sticking to the applicable corona rules are
higher for a person (maybe because they find it very inconvenient) than the expected
benefit of the outcome for that person if he were to stick to the rules (a very minor impact in
lowering the chance of getting the virus and also spreading it for the person individually).
9. Three hours. Because if you were to exercise 4 hours the marginal costs of 12, - would be
higher than the received marginal benefit for the 4 th hour (20-3-3-3=11, -).
10. The stimulus could be in order to make it more accessible for a person to study at a
university, the stimulus lowering the prices the university asks. And not giving the entire
subsidy once the student has graduated in order as not to incentivize universities to make
their courses impossible to fail. The unintended consequence of this stimulus could be that
universities make their courses impossible to complete in order to receive the entire
subsidy.
11. If the prices of certain goods are very high, then because of the limited individual resources
people have (limited individual unique amount of money on their bankcard), they will be less
likely to buy that product. Because of this the government can steer people's choices by
making something more expensive and vice versa.
12. Because the marginal benefit line crosses the marginal costs line, meaning that at that point
the marginal gains of one product are just as high as the marginal costs for producing one
more item. Therefore, there is no more profit to obtain and is maximized.
13. If you need certain coins in order to purchase the drink at a festival and changing them back
to money costs some time and effort, the festivals will sell more drinks because this makes it
more costly for you to not spend as many coins seeing as you then would spread those costs
over few drinks.