{"id":1688,"date":"2017-03-05T14:25:46","date_gmt":"2017-03-05T19:25:46","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/?post_type=chapter&p=1688"},"modified":"2017-10-08T20:57:09","modified_gmt":"2017-10-09T00:57:09","slug":"case-study-beer-or-cancer","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/chapter\/case-study-beer-or-cancer\/","title":{"raw":"Case Study - Beer or Cancer?","rendered":"Case Study – Beer or Cancer?"},"content":{"raw":"
Note that the Economics 103 Case Studies are meant to supplement the course material by giving you experience applying Economic concepts to real world examples. While they are beyond the level you will be tested on, they are useful for students who want a stronger grasp of the concepts and their applications.<\/div>\r\n\r\n[caption id=\"attachment_1740\" align=\"aligncenter\" width=\"662\"]\"\" Credit: University of Victoria[\/caption]\r\n\r\nInteresting things have been happening in the chemistry labs of UVic. Professor\u00a0Fraser Hof\u00a0and Philips Brewery chemist\u00a0Euan Thomson have been collaborating to revolutionize\u00a0the craft brewing process.<\/span>\r\n\r\nThe project was inspired by a very different\u00a0invention from Hof\u2019s lab\u2014the only one of its kind. \u201cWe created a tool for profiling the proteins in cancer cells,\u201d said Hof. \u201cAnd I realized that it could also be used to profile the proteins in brewer\u2019s yeast.\u201d<\/span>\r\n\r\n\"\"\r\n

Read more about the beer chemistry collaboration.<\/a><\/p>\r\nIn Topic 1 we talked about\u00a0the opportunity costs of an action. Let's explore how opportunity costs might impact decisions on what to research.<\/span>\r\n\r\nAssume that the government\u00a0provides\u00a0$50,000\/year for the department to conduct\u00a0cancer research,\u00a0<\/span> and the costs of operating the research lab is\u00a0$30,000. Philips offers $70,000\/year to do beer research, but researching beer would increase costs by $5,000.\r\n\r\n1. What is the opportunity cost of conducting cancer research? Break this into implicit and explicit costs.<\/strong>\r\n\r\n2. What option will the department choose? What are the opportunity costs of this choice?<\/strong>\r\n\r\n3. What is the total economic profits from this choice?<\/strong>\r\n\r\n4. If the cancer lab was offered $30,000 to shut down what would be the opportunity cost?<\/strong>\r\n\r\n5. What is the minimum amount the government would have to provide for the department to conduct cancer research?<\/strong>\r\n\r\n6. Why\u00a0must the government pay the lab more money for the same work as before? What does this show us about how opportunities effect compensation?<\/strong>\r\n\r\nAcademic pursuits often have high private opportunity costs - its why professors are so well paid.\u00a0\u00a0If they\u2019re paid too little, the brightest PhDs will turn to industry instead of academia and universities will suffer. In order to attract experts from industry, the university needs to have the resources to compensate them.<\/span>\r\n\r\n\"\"\r\n

Read more about professor compensation.<\/a><\/p>\r\nConsider an Economics prof who could be making $80,000 in the private sector, and a Business prof that could be making $100,000. Assume the individuals value the added prestige and benefits from being a prof at $20,000.\r\n\r\n7. All else equal, how much will you have to pay each professor to entice\u00a0them to teach?<\/strong>\r\n\r\nIn this case study we have shown how microeconomic concepts of opportunity costs\u00a0can be used to understand current events and practical examples. Do you have an example\u00a0you think would make a good case study? Contact economics103@uvic.ca to propose your story.<\/span>","rendered":"

Note that the Economics 103 Case Studies are meant to supplement the course material by giving you experience applying Economic concepts to real world examples. While they are beyond the level you will be tested on, they are useful for students who want a stronger grasp of the concepts and their applications.<\/div>\n
\"\"
Credit: University of Victoria<\/figcaption><\/figure>\n

Interesting things have been happening in the chemistry labs of UVic. Professor\u00a0Fraser Hof\u00a0and Philips Brewery chemist\u00a0Euan Thomson have been collaborating to revolutionize\u00a0the craft brewing process.<\/span><\/p>\n

The project was inspired by a very different\u00a0invention from Hof\u2019s lab\u2014the only one of its kind. \u201cWe created a tool for profiling the proteins in cancer cells,\u201d said Hof. \u201cAnd I realized that it could also be used to profile the proteins in brewer\u2019s yeast.\u201d<\/span><\/p>\n

\"\"<\/p>\n

Read more about the beer chemistry collaboration.<\/a><\/p>\n

In Topic 1 we talked about\u00a0the opportunity costs of an action. Let’s explore how opportunity costs might impact decisions on what to research.<\/span><\/p>\n

Assume that the government\u00a0provides\u00a0$50,000\/year for the department to conduct\u00a0cancer research,\u00a0<\/span> and the costs of operating the research lab is\u00a0$30,000. Philips offers $70,000\/year to do beer research, but researching beer would increase costs by $5,000.<\/p>\n

1. What is the opportunity cost of conducting cancer research? Break this into implicit and explicit costs.<\/strong><\/p>\n

2. What option will the department choose? What are the opportunity costs of this choice?<\/strong><\/p>\n

3. What is the total economic profits from this choice?<\/strong><\/p>\n

4. If the cancer lab was offered $30,000 to shut down what would be the opportunity cost?<\/strong><\/p>\n

5. What is the minimum amount the government would have to provide for the department to conduct cancer research?<\/strong><\/p>\n

6. Why\u00a0must the government pay the lab more money for the same work as before? What does this show us about how opportunities effect compensation?<\/strong><\/p>\n

Academic pursuits often have high private opportunity costs – its why professors are so well paid.\u00a0\u00a0If they\u2019re paid too little, the brightest PhDs will turn to industry instead of academia and universities will suffer. In order to attract experts from industry, the university needs to have the resources to compensate them.<\/span><\/p>\n

\"\"<\/p>\n

Read more about professor compensation.<\/a><\/p>\n

Consider an Economics prof who could be making $80,000 in the private sector, and a Business prof that could be making $100,000. Assume the individuals value the added prestige and benefits from being a prof at $20,000.<\/p>\n

7. All else equal, how much will you have to pay each professor to entice\u00a0them to teach?<\/strong><\/p>\n

In this case study we have shown how microeconomic concepts of opportunity costs\u00a0can be used to understand current events and practical examples. Do you have an example\u00a0you think would make a good case study? Contact economics103@uvic.ca to propose your story.<\/span><\/p>\n","protected":false},"author":58,"menu_order":5,"comment_status":"closed","ping_status":"closed","template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-1688","chapter","type-chapter","status-publish","hentry"],"part":24,"_links":{"self":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/1688","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/users\/58"}],"replies":[{"embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/comments?post=1688"}],"version-history":[{"count":11,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/1688\/revisions"}],"predecessor-version":[{"id":2292,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/1688\/revisions\/2292"}],"part":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/parts\/24"}],"metadata":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapters\/1688\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/media?parent=1688"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/pressbooks\/v2\/chapter-type?post=1688"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/contributor?post=1688"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.bccampus.ca\/uvicecon103\/wp-json\/wp\/v2\/license?post=1688"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}