AREC Reading Questions 1

Anita knits scarves that she sells. When she knits 12 scarves a week her total cost is $144and when she knits 13 total cost is $169. thus her marginal cost of knitting the 13th scarf is

25

Microeconomics is.. A. National economy B. individual choice

B

Suppose that each police officer hired by the City of Gotham generates an average benefit to the community of $500 per week and the average salary of police officers is $600 per week. Should they hire more or less? A fewer B. more C. hard to say

C

The average benefit of carrying out an activity is.. A. the total benefit of undertaking n units of an activity divided by the time it takes you to undertake those units B. the relevant benefit to consider when deciding whether to undertake an activity C. the increase in total benefit that results from carrying out one additional unit of the activity D. the total benefit of undertaking n units of an activity divided by n

D

The marginal benefit of carrying out an activity is the.. A. total benefit of undertaking n units of an activity divided by n B. smallest benefit achieved when undertaking an activity C. benefit that can be ignored when undertaking an activity D. increase in total benefit that results from carrying out one additional unit of the activity

D

A ______ economic principle is one that says how people should behave

Normative

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

Opportunity

A___ cost is a cost that is beyond recovery at the moment a decision must be made

Sunk

A _____ economic principle is one that predicts how people will behave

positive

A rational person is someone A. with well-defined goals who tries to fulfill those goals as best as she can B. who tries to justify their actions through whatever means possible C. who consumes very little

A

The Cost-Benefit Principle states that an individual or society should only take action if, and only if.... A. The extra benefits from taking action are at least as great as the extra costs B. They are able to do so given their resource constraints C. The extra costs of taking the action is close to zero

A

The economic surplus of an action is... A. the benefit of taking an action minus its cost B. additional resources that are expended when you take an action C. the benefit of taking an action

A

Economic models are useful in explaining and predicting behavior.... A. only to the extent that people are consciously aware of those models when making decisions B. even if people aren't consciously using those models to make decisions

B

If it costs Sam $150 to grow 300 tomatoes in his garden then his average cost of growing a tomato is A. $300 B. .50 C. 2.00 D. 150

B

The ___ principle states that a person is more likely to take an action if its benefit rises, and less likely to take an action if its costs rises

Incentive

The Scarcity Principle captures the notion that although we have boundless needs and wants, the resources available to us are limited to... A. people are destined to be unsatisfied B. we must use our resources carefully so that we never need to make trade-offs C. Having more of one good thing usually means having less of another

C