Macro - 2.1.4 and 2.1.5

Suppose you have three choices as to what to do for two hours on Sunday afternoon: work around the house, earning $3.50 an hour; baby-sit for your neighbor, earning $10 an hour; or go to the movies and pay $6 for a ticket. You choose to go to the movies. What is your opportunity cost?

$26

Which of the following is a normative statement? a. the deduction for state taxes cost the federal government $100 billion a year b. taxpayers in North Carolina pay state taxes that are above the national average c. twenty-two states use a lottery to raise state taxes d. congress is considering Clinton's tax plan to increase taxes, which is a fair plan. e. none of the above

congress is considering Clinton's tax plan to increase taxes, which is a fair plan

When economists evaluate consumer behavior, they assume:

everyone acts in his or her own self interest

In using marginal analysis, we:

examine only the marginal costs, ignoring the sunk costs

True or False: According to economic theory, when people make a decision, they only consider the sunk cost involved

false

True or False: If you and your friend have the same choice of activities on a Wednesday evening, you each have the same opportunity cost for your choices.

false

Trade-offs are made out of necessity. They are necessary due to:

scarcity

Which of the following is not a concern of positive economics? a. the effects of lowering the capital gains tax b. whether raising the minimum wage is the morally right thing to do c. the effects of raising the minimum wage d. the effects of regulation on an industry e. whether raising the sales tax will decrease total sales

whether raising the minimum wage is the morally right thing to do

Which of the following cannot cause the PPF to shift outward? a. a decrease in amount of land available b. an increase in the amount of labor available c. an increase in resource availability d. an increase in the capital stock e. an improvement in technologies

a decrease in amount of land available

Assuming ceteris paribus, how would a decrease in the supply of labor be represented on a PPF?

inward shift of the entire frontier

What does a point on the outside of the PPF graph indicate

levels of production that cannot be reached with the available resources

Which of these can be found using a PPF? a. equilibrium price b. opportunity costs c. production costs d. maximum profit

opportunity costs

if the trade-off for the production of two goods is constant:

the PPF is a straight line

What is the primary difference between normative and positive economics?

the goal of normative economics is to say what action people should take; this is not true in positive economics

True or False: The key to marginal analysis in a cost-benefit analysis is weighing the additional cost against the additional benefit, not the total cost against the total benefit.

true

What is shown on the x and y axes of a PPF graph

two types of output