ECON 201 CH 1 LEARNING CURVE

Evie, a receptionist at a car dealership, asks herself the question, "Should I go back to school, or should I continue to work at the dealership?" The fact that she is comparing the idea of going to school with her next best option indicates that she is applying the _____ principle. opportunity cost marginal cost-benefit interdependence

opportunity cost

If an employer offers a potential employee $40,000, but the employee would be willing to work for $35,000, and the employer will make $55,000 from the work that the employee does. Assuming that the employee takes the job for $40,000, what is the employer's economic surplus? $5,000 $15,000 $20,000 $35,000

$15,000

You make a clay pot for $10 and sell it to a customer for $40. What is your economic surplus associated with the transaction? $0 $10 $30 $40

$30

Deniz produces cups and bowls. Her production possibility frontier for a particular amount of time is displayed below. What is the opportunity cost of producing an additional cup? (1 cup for every 2 bowls) Half a bowl 2 bowls 12 bowls 24 bowls

2 bowls

Which of the four core principles of economics can be used to simplify the question, "How many more products should be produced?" into the question, "Should one more product be produced?" The interdependence principle The opportunity cost principle The cost-benefit principle The marginal principle

The marginal principle

Which of these principles, when followed correctly, causes people to avoid making choices that reduce their economic surplus? The interdependence principle The opportunity cost principle The cost-benefit principle The marginal principle

The cost-benefit principle

Hyunh has made a chart of the costs and benefits associated with buying a new car. Should she buy a new car? Why or why not? Costs: $2,000 Cost of the car $300 Gas costs $2,000 Insurance $800 Repairs Benefits: $5,500 transportation service savings Yes, because the money she saves from not taking an Uber is more than any of the individual costs of buying a car. No, because the costs of buying a car are greater than the benefits. Yes, because the benefits of buying a car are greater than the costs. No, because the purchase price of the car is more than the saved Uber fares.

Yes, because the benefits of buying a car are greater than the costs.

Raul is considering going to college for another year. He is creating a chart of the costs and benefits of this decision. He knows that tuition will cost $10,000, but he has a scholarship for $8,500. Should he decide to attend the college? How much should he put for tuition in the cost column of his chart? ($50,000 Raul's willingness to pay for a degree) Yes. $1,500. Yes. $8,500. No. $10,000. No. $18,500.

Yes. $1,500.

When a person makes a decision following the cost-benefit principle, they generate: sunk costs scarcity financial benefits economic surplus.

economic surplus

When you follow the rational rule, you can maximize: economic surplus total benefit marginal benefit marginal cost.

economic surplus

You are the CEO of a car manufacturing company, and realize that you may have to lay off 10,000 employees unless you take some other form of action. Your Chief Financial Officer comes up with two solutions: the first saves 6,000 jobs, and the second causes the company to lose 4,000 jobs. The first option sounds ideal at first; however, both options give the same outcome of cutting 4,000 jobs and saving 6,000 jobs. This example represents the concept of: marginal principle cost-benefit principle rational rule framing effect.

framing effect.

Ayalon owns a fast food restaurant that is open 18 hours a day. He is considering the idea of having his restaurant remain open 24 hours a day, but he realizes that the success of this plan may be affected by the changing hours of his competitors. Ayalon is taking into account the _____ principle. marginal interdependence opportunity cost cost-benefit

interdependence

Ella talks about how she applies an economic concept into her situation. She actually would enjoy buying a meal for her friend, but the cost-benefit principle tells her that it would be a cost and not a benefit. As an economics student, how would you explain the cost-benefit principle to her? Buying food costs money and there is no benefit to Ella, but only to her friend. Ella has to weigh the cost of food to the chance of getting her money back from a friend. The cost-benefit principle does not apply to this scenario. Ella earns a nonfinancial benefit from the enjoyment of treating her friend.

Ella earns a nonfinancial benefit from the enjoyment of treating her friend.

Which of these might change the best choice you have? Finding a different alternative than your next best alternative The way that your choices are described Expectations about the future Sunk costs

Expectations about the future

Manzo produces shirts and jeans. His production possibility frontier for a particular amount of time is displayed below. What is the opportunity cost of producing an additional shirt? (produces 2 shirts for every pair of jeans) Half a pair of jeans 2 pairs of jeans 6 pairs of jeans 12 pairs of jeans

Half a pair of jeans

What happens to the production possibility frontier when a technique is discovered that allows more outputs to be produced with the same amount of inputs? It expands outward It shrinks inward The slope becomes less steep The slope becomes steeper.

It expands outward

Angela owns a software company with 10 employees. Because she is not sure whether an 11th employee would improve her economic surplus, she hires another employee and notices that her total costs have increased by $1,250 and her total revenue has increased by $1,000. Which of these would be the best course of action for Angela? Let the 11th employee go, or do not replace the next employee who quits. Hire another employee. Hire 11 more employees. Keep the 11th employee, but do not hire any more employees.

Let the 11th employee go, or do not replace the next employee who quits.

In order to ensure that you are applying the opportunity cost principle correctly, when you pose a question, which word or phrase should always appear in the middle of the sentence? How many Or Outweigh What else

Or

Why does every choice you make affect your other decisions? The someone else's shoes technique Scarcity Sunk costs The framing effect

Scarcity

When you confront a problem, which of the four economic principles should you consider last? The cost-benefit principle The interdependence principle The opportunity cost principle The marginal principle

The interdependence principle

You are thinking about quitting your job to go back to school. Which of these is not associated with an opportunity cost? Costs of going to school 1. Tuition costs $50,000 2. You quit your job 3. Room and board cost $26,000 4. 8 hours per day studying Costs of the next best alternative 1. You won't pay tuition 2. You earn $60,000 from your job 3. Rent and meals cost $23,000 4. 8 hours per day working Income Food and housing Time spent Tuition

Time spent

When someone seeks to be aware of how a decision is affected by other decisions, they are taking into account the _____ principle. interdependence opportunity cost marginal cost-benefit

interdependence