Chapter 1 and 2 Review

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job. He estimates that he will lose 5 hours at work, at a wage of $6 per hour. Carl's opportunity cost of attending the concert equals what?

$85

A professional basketball players' union negotiates a contract that dramatically increases all players' salaries. How would this influence the opportunity cost for a player who was considering giving up basketball to pursue a career in broadcasting?

It would increase the opportunity cost of becoming a broadcaster.

Economics is the study of choice under conditions of:

Scarcity

Sven has a comparative advantage over Alice in cooking but not in doing the laundry. Which of the following must be true?

Sven must have allowed opportunity cost than Alice for cooking.

Combinations of goods on the production possibilities curve

can be produced using current available resources and technology

High-income people will sometime pay higher prices at convenience stores for goods that are available at discount stores. They do this because

crowded and understaffed discount stores impose higher time costs

Due to a scarcity of resources:

every society must choose among competing uses of available resources

In a market economy, most of what we consume is obtained by

exchange

The money we pay for a good or service

general is only part of its opportunity cost

In examining consumer behavior, one of the constraints faced by consumers is

income

Characteristic of entrepreneurship?

it is associated with risk taking and innovation

The system of resource allocation in the US is a

market system with elements of tradition and command

Molly needs 30 minutes to wash the car and 45 minutes to mow the lawn. Renee needs 1 hour to wash the car and 2 hours to mow the lawn. Which of the following statements is correct

molly should specialize in both tasks Renee should specialize in both tasks Each woman should specialize in the task in which she has the absolute advantage - Absolute advantage is not an appropriate guide for determining specialization Neither woman should specialize.

A shift in the production possibilities frontier could be due to

technological improvements in production.

If a society is on its production possibilities front, and decides to produce more health care,

the cost of producing an additional unit of health care will rise.

The concave shape of the production possibilities front reflects

the law of increasing opportunity cost

The principle of specialization and exchange implies that

total production is highest when individuals specialize according to their comparative advantages

The opportunity cost of any activity can be measured by the

value of the best alternative to that activity