1. Opportunity Cost Calculation: Continuing cancer research: $50,000 (government grant) - $30,000 (operating costs) = $20,000 (net benefit) Accepting brewery offer: $70,000 (Philips offer) - $5,000 (additional operating costs) = $65,000 (net benefit) Opportunity cost of continuing cancer research: $65,000 (net benefit from brewery offer) - $20,000 (net benefit from cancer research) = $45,000 1. Cost-Benefit Analysis: If the lab's goal is to maximize economic profit, they should accept the brewery's offer, as it provides a higher net benefit ($65,000 vs. $20,000). Total Economic Profit (brewery research): $70,000 (revenue) - $35,000 (total operating costs) = $35,000 Opportunity Cost (additional offer): $65,000 (net benefit from brewery offer) + $30,000 (additional offer) = $95,000 Minimum Government Funding: $95,000 (opportunity cost) - $50,000 (current grant) = $45,000 (minimum additional funding required) Lab's Demand for Higher Compensation: The lab would demand higher compensation from the government because they have alternative options (brewery offer) that provide higher economic profit. This reflects the concept of opportunity costs affecting wages, as the lab must be compensated for the value they could earn elsewhere. Question: Draw a Graphs/charts: A hypothetical supply and demand curve showing the market for research funding. Profit maximum graph indicating the total revenue
1. Opportunity Cost Calculation: Continuing cancer research: $50,000 (government grant) - $30,000 (operating costs) = $20,000 (net benefit) Accepting brewery offer: $70,000 (Philips offer) - $5,000 (additional operating costs) = $65,000 (net benefit) Opportunity cost of continuing cancer research: $65,000 (net benefit from brewery offer) - $20,000 (net benefit from cancer research) = $45,000 1. Cost-Benefit Analysis: If the lab's goal is to maximize economic profit, they should accept the brewery's offer, as it provides a higher net benefit ($65,000 vs. $20,000). Total Economic Profit (brewery research): $70,000 (revenue) - $35,000 (total operating costs) = $35,000 Opportunity Cost (additional offer): $65,000 (net benefit from brewery offer) + $30,000 (additional offer) = $95,000 Minimum Government Funding: $95,000 (opportunity cost) - $50,000 (current grant) = $45,000 (minimum additional funding required) Lab's Demand for Higher Compensation: The lab would demand higher compensation from the government because they have alternative options (brewery offer) that provide higher economic profit. This reflects the concept of opportunity costs affecting wages, as the lab must be compensated for the value they could earn elsewhere. Question: Draw a Graphs/charts: A hypothetical supply and demand curve showing the market for research funding. Profit maximum graph indicating the total revenue
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Opportunity Cost Calculation: Continuing cancer research: $50,000 (government grant) - $30,000 (operating costs) = $20,000
(net benefit) Accepting brewery offer: $70,000 (Philips offer) - $5,000 (additional operating costs) = $65,000 (net benefit)
Opportunity cost of continuing cancer research: $65,000 (net benefit from brewery offer) - $20,000 (net benefit from cancer
research) = $45,000 1. Cost-Benefit Analysis: If the lab's goal is to maximize economic profit, they should accept the brewery's
offer, as it provides a higher net benefit ($65,000 vs. $20,000). Total Economic Profit (brewery research): $70,000 (revenue) -
$35,000 (total operating costs) = $35,000 Opportunity Cost (additional offer): $65,000 (net benefit from brewery offer) +
$30,000 (additional offer) = $95,000 Minimum Government Funding: $95,000 (opportunity cost) - $50,000 (current grant) =
$45,000 (minimum additional funding required) Lab's Demand for Higher Compensation: The lab would demand higher
compensation from the government because they have alternative options (brewery offer) that provide higher economic profit.
This reflects the concept of opportunity costs affecting wages, as the lab must be compensated for the value they could earn
elsewhere. Question: Draw a Graphs/charts: A hypothetical supply and demand curve showing the market for research funding.
Profit maximum graph indicating the total revenue
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