Chapter 1

In the graph of a straight line, the vertical intercept is the value taken by the dependent variable when the independent variable is equal to _____.

0

If the equation C = 1 + 0.50H is graphed with C on the vertical axis and H on the horizontal axis, then the vertical intercept will be:

1

If the equation F = 15 + 2N is graphed with F on the vertical axis and N on the horizontal axis, then the vertical intercept will be:

15

A formula is a mathematical expression that describes the relationship between two or more variables.

False

Economic models are useful in explaining and predicting behavior only to the extent that people are consciously aware of those models when making decisions.

False

Suppose you pay $35 to reserve a camp site at a local state park. The rules specify that you can only receive a refund if you cancel your reservation 2 weeks before your trip. Several days before your trip, you learn that it's supposed to rain the whole time you had planned to camp, and you are having second thoughts about going. Should the $35 you paid for the camp site factor into your decision about whether to go camping?

No

Suppose you pay $75 to buy a ticket to see one of your favorite bands next month. When the day of the concert rolls around, should the cost of the ticket figure into your decision about whether to go to the concert (assume you have no way to sell your ticket to anyone else)?

No

Suppose you're trying to decide what to cook for dinner. Both the chicken and the salmon you have in your fridge are about to go bad, and whichever one you don't eat tonight, you'll have to throw away. In deciding which one to cook, should it matter to you that the salmon was slightly more expensive than the chicken?

No.

Economists believe that scarcity is

a fundamental fact of life for everyone

People sometimes apply the Cost-Benefit Principle incorrectly because they evaluate costs and benefits ______.

as proportions rather than absolute dollar amounts

The value of a(n) _____ variable is determined by the value taken by another variable in the equation.

dependent

The benefit of taking an action minus its cost is known as

economic surplus.

A mathematical expression that describes the relationship between two or more variables is a(n) ______.

equation

When making decisions, people sometimes make mistakes because they ______.

fail to consider implicit costs

When deciding whether to take an action, one common decision pitfall is to ______.

ignore the implicit cost of the action

The marginal benefit of carrying out an activity is the

increase in total benefit that results from carrying out one additional unit of the activity.

In standard economic models, a rational person

makes choices by weighing the extra benefits of an action against its extra costs.

One common decision pitfall is to ______.

measure costs and benefits as proportions rather than absolute dollar amounts

A positive economic principle ______.

one that predicts how people will behave

The value of what must be foregone in order to undertake an activity is the _____ cost of that activity

opportunity

A principle that predicts how people will behave is called a(n):

positive economic principle.

In economics, a(n) _____ individual is someone with well-defined goals who tries to fulfill those goals as best they can.

rational

Costs that are beyond recovery at the moment a decision is made ______.

should not factor into the cost--benefit calculation

A(n) _____ cost is a cost that is beyond recovery at the moment a decision is made.

sunk

Which of the following costs should be ignored when weighing the costs and benefits of an action?

sunk costs

The average benefit of carrying out an activity is ______.

the total benefit of undertaking n units of an activity divided by n

The average cost of carrying out an activity is

the total cost of undertaking n units of an activity divided by n

When people ignore the implicit cost of activities ______.

they tend to make the wrong choice

Economic models are _____ if people do not consciously weigh costs and benefits when making decisions.

useful even

A quantity that is free to take on different values is a(n):

variable

Economists view scarcity as

an unavoidable fact of life