ECON 212 Ch. 1 Pre-Class: Core Principles

An employer offers a potential employee $40,000, even though the employee would be willing to work for $35,000. The employer will make $55,000 from the work that this employee does. Assuming that the employee takes the job for $40,000, what is the employer's economic surplus?

15000

Jenna is considering going to college for another year. She is creating a chart of the costs and benefits of this decision. She knows that tuition will cost $20,000, but she has a scholarship for $15,500. How much should she put for tuition in the cost column of her chart?

4500

Which of these BEST explains why there is no decision that does not have associated costs?

Every choice you make causes you to give up doing something else.

Zaina owns a retail store with 15 employees. Because she is not sure whether a 16th employee would improve her economic surplus, she hires another employee and notices that her total costs have increased by $1800, and her total revenue has increased by $2,500. Which of these would be the best course of action for Zaina?

Keep the 16th employee and experiment by hiring an additional employee.

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

Marginal Principle

_____ is the difference between the consequences of making a choice and the consequences of the next best alternative.

Opportunity cost

Which BEST explains why sunk costs should have no bearing on the application of the opportunity cost principle?

Sunk costs will be incurred in both your choice and the next best alternative.

Alia 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.

You have to try to persuade your parents to go to your graduation because your brother's talent show is scheduled for the same time. This BEST exemplifies which of these interdependencies?

dependencies between people

Natasha starts a small software company but finds it difficult to hire good software developers since she has a very large competitor half a mile away. This is BEST explained by which of these interdependencies?

dependencies between people or businesses

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?

half a pair of jeans

Economic analysis always begins by focusing on:

individual decisions

Jacob owns a phone repair shop that is open 6 hours a day. He is considering the idea of having his shop remain open 12 hours a day, but he realizes that the success of this plan may be affected by the changing hours of his competitors. Jacob is taking into account the _____ principle.

interdependence

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

You are considering starting a sandwich shop but are comparing that to the idea of staying at your current job instead. Which economic principle are you taking into account?

opportunity cost principle

You are trying to decide if you should buy a warmer coat but 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

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

the next best alternative

You are thinking about quitting your job to go back to school. Which of these is not associated with an opportunity cost?

time spent

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

to forecast other people's decisions

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

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