Ch. 1 Quiz: Core Principles

Please select the economic term that is best described by each statement. People have limited resources.

Scarcity

It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should ___ because the benefit to you of taking the Uber is ___ than the cost.

walk; less

Ivan has inherited his mother's 1963 Chevrolet Corvette, which he values at $45,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for one, so they agree on a price of $55,000 for the car. How much economic surplus, if any, does Ivan gain from engaging in this exchange?

$1000

Ivan has inherited his mother's 1963 Chevrolet Corvette, which he values at $45,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for one, so they agree on a price of $55,000 for the car. How much economic surplus, if any, does Samantha gain from engaging in this exchange?

$17000

A friend comes up to you and offers you a free ticket to a Dodgers game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game?

$85

The interdependence principle states that your best choice today depends on all of these EXCEPT: 1. past decisions you have made. 2. expectations about the future. 3. other decisions you are currently making. 4. decisions others are currently making.

1.

The sales team at American Signature has reported that sales of couches have increased. The company would like to increase manufacturing from 100,000 couches to 200,000 couches. As the company's economist, what is the opportunity cost of producing the 100,000 additional couches?

300,000 recliners

Khaled is a preschool teacher working at a public school, but he is considering quitting his job to start a daycare facility of his own. Indicate which of the four types of interdependency is most relevant to each factor in Khaled's decision. Use the market for daycare facilities as Khaled's market of interest. If Khaled opens his own facility, he will be responsible for taxes, insurance, licensing, and facility upkeep, among other things. However, as a teacher Khaled will only need to keep up his teaching license. In addition, Khaled will not be able to take a long vacation in the summer if he runs a daycare center. This scenario is an example of dependencies

Between each of your individual choices.

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

Ivan has inherited his mother's 1963 Chevrolet Corvette, which he values at $45,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for one, so they agree on a price of $55,000 for the car. ___ ___ ___ ___ willing to voluntarily engage in this exchange.

Ivan and Samantha are both

Please select the economic term that is best described by each statement. Everything you do requires giving up something (time, money, etc.).

Trade offs

Lee watches a beautiful sunset from the back porch of his house. The four core principles of economics

apply because Lee could have been doing something else.

Gilberto is deciding whether to vote in the next election. The four core principles of economics

apply to this decision because Gilberto should consider the costs and benefits associated with voting.

Khaled is a preschool teacher working at a public school, but he is considering quitting his job to start a daycare facility of his own. Indicate which of the four types of interdependency is most relevant to each factor in Khaled's decision. Use the market for daycare facilities as Khaled's market of interest. Khaled knows there are few daycare facilities in the area, but many families looking for daycare.This scenario is an example of dependencies ___ ___ ___ ___ ___ ___ ___ ___.

between people or businesses in the same market

The cost-benefit principle evaluates ___ costs and benefits, and willingness-to-pay considerations quantify ___ costs and benefits.

both monetary and nonmonetary; only nonmonetary

Identify which of the four core principles of economics is most relevant for each aspects of that decision. "Reading this textbook will require time and effort, but doing so will help you improve your grade in this course." This statement is related to the ___ principle.

cost-benefit

Which decision is least likely to be well explained by marginal analysis?

deciding which college to attend

During the economic downturn of 2008-2009, the unemployment rate increased to nearly 10%. At the same time, the price of higher education tuition and the number of enrollees increased. Which statement best explains why more people enrolled in higher education institutions during this time period even as the price of tuition increased? More people enrolled because

if the next best option was unemployment, many individuals may have preferred to enroll in higher education and gain new skills in hopes of increasing their future employment prospects.

Identify which of the four core principles of economics is most relevant for each aspects of that decision. "Reading this textbook will help establish a solid foundation for understanding concepts you will learn in more advanced economics courses." This statement is related to the ___ principle.

interdependence

Identify which of the four core principles of economics is most relevant for each aspects of that decision. "Each page that you read and each practice problem that you complete will help you increase your understanding of the material." This statement is related to the ___ principle.

marginal

Following the Rational Rule, the maximum economic surplus occurs when:

marginal benefits equal marginal costs.

Identify which of the four core principles of economics is most relevant for each aspects of that decision. "The time you will spend reading this textbook can also be used to study for your chemistry exam." This statement is related to the ___ principle.

opportunity cost

A central and fundamental theme in economics is that:

resources are limited and cannot satisfy all the ways a society wants to use them.

Dependencies over time reflect the fact that:

resources can be spread across time.

The marginal cost of an additional worker is:

the additional cost of hiring one more worker

The opportunity cost of a good is:

the value of the next best alternative given up to acquire the good.

Juan is willing to pay $900 for a new iPad. He offers to pay $800 for an iPad at the Apple store. It costs Apple $700 to produce this iPad. A voluntary economic transaction between Juan and Apple ___ occur because ___ would be better off due to the transaction.

will; both Juan and Apple

Ivan has inherited his mother's 1963 Chevrolet Corvette, which he values at $45,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for one, so they agree on a price of $55,000 for the car. How much total surplus, if any, is gained from this exchange?

$27000

Khaled is a preschool teacher working at a public school, but he is considering quitting his job to start a daycare facility of his own. Indicate which of the four types of interdependency is most relevant to each factor in Khaled's decision. Use the market for daycare facilities as Khaled's market of interest. An increase in graduation rates for teachers saturates the market for preschool teachers. This decreases the wages of teachers. This scenario is an example of dependencies ___ ___.

Between markets