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1. Suppose you have been offered a choice of two part-time jobs:
10 hours a week at a local restaurant for $15 dollars an hour; or
3 hours a day 5 days a week working as a pizza deliverer for $11 per hour
plus the benefit of using the car to travel to work every day (assuming that
you do not have any other benefit from having the work car). Assume you
would otherwise travel to work by public transport, costing you $5 a day.
Ignore the difference between travelling time of car and public transport.
Assume that you value an hour of leisure at $9 and that you will take one and
only one of the jobs, what is:
a. The opportunity cost of taking the restaurant job? [2 mark]
b. The opportunity cost of taking the pizza delivery job? [2 mark]
2. Suppose that the economy consists of four individuals, Mary, Steven, Laura and
Josh and that there are four projects, A, B, C, and D being considered. The net
benefits, measured in dollars, received by the four individuals from each of the
four projects are reported in the following Table:
Individual Project
A B C D
Mary +7 -11 +8 +9
Steven +3 30 -10 -7
Laura +8 -7 +6 6
Josh +5 -14 +11 -8
Which of the projects, if any, can be described as follows:
a. A Pareto improvement? [1 mark]
b. A potential (though not an actual) Pareto improvement? [1 mark]
c. Neither a potential nor an actual Pareto improvement? [1 mark]
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