Econ Midterm 1
Dividing the total cost of undertaking n units of an activity by n reveals the
average cost
Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant that gives free refills. According to the Cost-Benefit Principle Tim should
drink a third glass of soda if the extra benefit of doing so is positive
Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______.
economic surplus; $3,000
In general, individuals and nations should specialize in producing goods ______ other individuals or nations
for which they have a lower opportunity cost compared to
Larry has a comparative advantage over his classmates in writing term papers if he
has a lower opportunity cost of writing term papers than his classmates
A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a
production possibilities curve
If a nation can produce a more computers per year than any other nation, that nation has a(n) ______ advantage in the production of computers
absolute
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is:
$1
Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is
$35
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is your opportunity cost of going to work on Saturday?
$35
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is the opportunity cost of going to the concert?
$36
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is
$75
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?
No, the benefit of going to the concert is less than the cost.
The downward slope of the production possibilities curve illustrates the
Scarcity Principle
You want to buy a TV that regularly costs $250. You can either buy the TV from a nearby store or from a store that's downtown. Relative to going to the nearby store, driving downtown involves additional time and gas. The downtown store, however, has a 10 percent off sale this week. Last week you drove downtown to save $20 on some concert tickets, a 15 percent savings. Should you drive downtown to buy the TV?
Yes, because you will save more than $20
The United States generally has a comparative advantage in the development of technology because it has
a disproportionate share of the world's best research universities
Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of
inconsistent reasoning; saving $20 is saving $20.
The Incentive Principle states that a person
is more likely to take an action if its benefit increases
The Cost-Benefit Principle indicates that an action should be taken if
its extra benefit is greater than or equal to its extra cost
If individuals are rational, they should choose actions that yield the:
largest economic surplus
One thing that distinguishes normative economic principles from positive economic principles is that
normative principles tell us how people should behave, and positive principles tell us how people will behave
The Scarcity Principle tells us ______, and the Cost-Benefit Principle tells us ______
that choices must be made; how to make good choices
Microeconomics differs from macroeconomics in that microeconomics focuses on
the choices made by individuals and the implications of those choices
The economic surplus of an action is
the difference between the benefit and the cost of taking an action
The opportunity cost of an activity includes the value of
the next-best alternative that must be foregone
Macroeconomics differs from microeconomics in that macroeconomics focuses on
the performance of national economies and ways to improve that performance
Points that lie outside the production possibilities curve are ______, and points that lie inside the production possibilities curve are ______
unattainable; attainable
The scarcity principle states that
with limited resources, having more of one thing means having less of another
If you have a comparative advantage in a particular task, then
you give up less to accomplish that task than do others