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Tina hires Jeff to do odd jobs around her home and agrees to pay him $5 per hour. Tina further agrees to guarantee Jeff at least 40 hours of work per week, and to pay him 1.5 times his base pay for any hours worked beyond 40. If Jeff works 45 hours this week, are his wages a fix cost or a variable cost to Tina? Explain.
Imagine that you re on vacation in Russia, when suddenly your re arrested and accused of spying for the United States. (You re innocent, of course.) Your captors inform you that if you confess, you ll recive a prison sentence of two years, while your co conspirator (whom you ve never heard of) will receive a prison sentence of twenty years. If you both confess, you ll each receive a prison sentence of five years. You re also told that your co conspirator is being offered the same option. If you both maintain your innocence, however, there s not enough evidence to convict either of you. Applying economic theories to the problem, what should you choose to do, and why?
A hotel owner, having heard that new hotels plan to open in his area, says, We have too many hotels in this town already. Statistics show that vacancy rates average 20 percent on any given night. Assuming this is correct, evaluate his negative assessment of the situation in terms of business stealing and product variety externalities.
Explain the theory that education acts as a signaling device. How dose this contrast to the theory of education as an investment in human capital?
. Explain the difference between inferior goods and normal goods. As a developing economy experiences increases in income (measured by GDP), what do you predict will happen to the demand for inferior goods?
 

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