ECON 251 - Learning Curve 1

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 $40,00, what is the employer's economic surplus?

$15,000

The ___ principle reminds people that when they are deciding to spend their time, money, or anything else, they should also think about how else those resources could be used.

opportunity cost

When the time, effort, and other costs that someone puts into a project cannot be reversed, they are referred to as:

sunk costs

Opportunity costs are a result of:

scarcity

When properly applying the cost-benefit principle, you must calculate the costs and benefits of a decision relative to:

the next best alternative

Why does every choice you make affect your other decisions?

Scarcity

Making good decisions is all about maximizing:

economic surplus

Which of these is not one of the four core principles of economics? a) Marginal b) Framing c) Interdependence d) Opportunity Cost

Framing

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?

2 bowls

Every choice you make affects the resources available for every other one of your decisions. This is a fact that best describes what interdependicies?

Dependencies between your own choices

As expectations about the future change, your best choice might change. This best describes which type of dependency?

Dependencies through time

What might change the best choice you have?

Expectations about the future

Matthew has been diagnosed with cancer and doctors estimate that he has roughly 5 months to live. From an economic standpoint, which best explains why Matthew might be more likely than a healthy person to take a risky experimental drug?

His opportunity cost is lower than that of healthy people.

___ is a common measuring stick that allows different people to compare a wide variety of costs and benefits, taking into account both financial and nonfinancial aspects of a decision.

Money

What question best boils down the marginal principle?

One more unit?

What best describes what people should base their decisions on?

Opportunity costs

___ refer(s) to the problem that resources are limited.

Scarcity

What question cannot be simplified by applying the marginal principle?

Should I take one more class at school this semester?

___ are ignored in good decision making.

Sunk costs

When you confront a problem, which of the four economic principles should you consider last?

The Interdependence Principle

You have decided that you will buy pizza, but you are still trying to decide how many pieces of pizza you should buy. Which economic principle are you taking into account?

The Marginal Principle

What would prevent someone from falling for the framing effect?

The cost-benefit principle

Why do you need to do more than just calculate whether a financial profit will be made when you are deciding whether to start a new business?

The financial profits need to be at least as large as the opportunity cost of the investment of your time and money.

You are trying to decide if you should buy a warmer coat, but you realize that the answer to this question will depend on whether you are taking a trip to Canada next month. Which economic principle is taken into account?

The interdependence principle

What is relevant when you face a decision with an either/or question?

The marginal principle

When you confront a problem, which of the four economic principles should you consider first?

The marginal principle

Why do economists use the someone else's shoes technique?

To forecast other people's decisions

According to the ___ principle, your best choice depends on your other choices, the choices others make, developments in other markets, and exceptions about the future.

interdependence

If a person ignores the ___ principle, she might be tempted to consider each market in isolation.

interdependence

When someone seeks to be aware of how a decision is affected by other decisions, they are taking into account the ___ principle.

interdependence

Compared to terminally ill people, healthy people are ___ likely to try risky experimental drugs because their opportunity cost is ___.

less; higher

Because the opportunity cost of time is ___ during an economic downturn, people choose to see ___

lower; more

A decision ___ an out-of-pocket cost, and ___ an opportunity cost

may or may not have; always has

The ___ forces people to recall that whenever they choose to do something, they are implicitly choosing not to do something else.

opportunity cost principle

The ___ helps people make better decisions by forcing them to focus on the real trade-offs they face.

opportunity cost prinriple

Moving along your production possibility frontier reveals your:

opportunity costs

The production possibility frontier illustrates the tradeoffs, or ___, people confront when deciding how to best allocate their resources.

opportunity costs

Businesses ___ to learn their marginal costs and benefits.

experiment at the margin

How are inefficient uses of inputs represented on the graph of a production possibility frontier:

By points inside the production possibility frontier

How is an increase in productivity represented on the graph of a production possibility frontier?

By the entire frontier being pushed outward

Suppose that as more families have two full-time workers, more families put their children in day care. Which interdependency would explain the relationship here between labor and day care?

Dependencies between markets

What most often occurs due to competition for society's scarce resources?

Dependencies between people and businesses

What should not be a factor in a person's decision making?

The framing effect

What best describes the big idea behind the interdependence principle?

What else?

You are willing to pay $4 for a cheeseburger. According to the cost-benefit principle, when should you buy a cheeseburger?

When the cost is less than or equal to $4.

How can a manager maximize the economic surplus when hiring workers?

When the marginal cost of hiring the last worker is equal to the marginal benefit

When are out-of-pocket costs also opportunity costs?

When the out-of-pocket costs do not exist in the next best alternative.

Your willingness to pay for a pair of jeans is $50. According to the cost-benefit principle, when should you avoid buying a pair of jeans and instead opt to keep your money?

When the price of the jeans exceeds $50.

Your friend asks you to check out his favorite store because there is a big sales event going on. As an economic student, when should you buy the product?

When the sale price is below or as much as your willingness to pay

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?

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

Which of these would indicate that in order to increase production of a good, you need to decrease production of another good?

You are producing at a point on your production possibility frontier

Taken together, the cost-benefit principle and the opportunity cost principle say that a decision is worth making if the benefits it yields are:

at least as great as the opportunity cost

Changes in other markets can influence ___, and thereby change a person's best choice in another market.

cost and benefits

When someone weighs the pros and cons of a particular decision, they are taking into account the ___ principle.

cost-benefit

Sunk costs are:

costs that have been incurred and cannot be reversed

If the marginal benefit of hiring one more worker is less than the marginal cost, then hiring an additional worker will:

decrease economic surplus

The difference between the benefits someone enjoys and the costs associated with those benefits is called:

economic surplus

When you follow the rational rule, you can maximize:

economic surplus

The phenomenon that occurs when small differences in how choices are described can lead people to make different decisions is known as the:

framing effect

The ___ maps out the different sets of output that are attainable with the available resources.

production possibility frontier

According to the ___, if something is worth doing, you should keep doing it until your marginal benefits equal your marginal costs.

rational rule

If a decision boosts a person's economic surplus, then it must be true that the decision boosted:

total benefits more than total costs.

According to the rational rule, if something is worth doing, you should keep doing it until:

your marginal benefit equals your marginal cost