chapter 1

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is: Select one: a. $0.25. b. $6. c. $0. d. $4.

$0

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is: Select one: a. an economic problem because Chris has only one hour, and engaging in one activity means giving up the other. Chris has to make a trade-off: b. not an economic problem because neither activity costs money. c. an economic problem because the tuition Chris pays covers the cost of both the gym and the library. d. not an economic problem because it's an hour that Chris has no matter what he does.

a

Economics is best defined as the study of: Select one: a. how people make choices in the face of scarcity and the implications of those choices for society as a whole. b. inflation, interest rates and the stock market. c. the financial concerns of businesses and individuals. d. supply and demand.

a

Economists recognize that because people have limited resources: Select one: a. they have to make trade-offs. b. our future is bleak. c. they will never be happy. d. government intervention is necessary.

a

Economists use abstract models because: Select one: a. they are useful for describing general patterns of behavior. b. every economic situation is unique, so it is impossible to make generalizations. c. every economic situation is essentially the same, so specific details are unnecessary. d. computers have allowed economists to develop abstract models.

a

During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why? Select one: a. Students go to college even when the net benefit is negative. b. The opportunity cost of attending college is lower when unemployment is high. c. The benefit of attending college is lower because college graduates are less likely to find jobs. d. The opportunity cost of attending college is higher when unemployment is high.

b

The marginal cost of the 3rd unit of this activity is: a. $30 b. $20 c. $10 d. $25

b

ack has a ticket to see the Foo Fighters for which he paid $30 yesterday. He takes an unpaid day off from work to get ready for the concert. When he arrives at the concert, five different people offer him $70 for his ticket. Jack decides to keep his ticket. At the time he makes this decision, his opportunity cost of seeing the Foo Fighters is: Select one: a. $30 plus his foregone earnings. b. $70. c. $40. d. $70 plus his foregone earnings.

b

If all the world's resources were to magically increase one hundredfold, then: Select one: a. scarcity would disappear. b. trade-offs would become unnecessary. c. people would still have to make trade-offs. d. economics would no longer be relevant.

c

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work? Select one: a. Pat should take the bus if saving half an hour is worth $0.50 or more. b. Pat should take the bus because it costs $0.50 less than driving. c. Pat should drive if saving half an hour is worth $0.50 or more. d. Pat should drive because it saves half an hour relative to taking the bus.

c

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: Select one: a. not drink a third glass of soda. b. drink a third glass of soda if his total benefit from drinking soda is positive. c. drink a third glass of soda if the extra benefit of doing so is positive. d. drink a third glass of soda.

c

The Incentive Principle is an example of: Select one: a. over-estimating the benefits of an action. b. a normative economic principle. c. a positive economic principle. d. an economic decision-making pitfall.

c

The Incentive Principle states that a person: Select one: a. should take an action if its cost increases. b. is more likely to take an action if its cost increases. c. is more likely to take an action if its benefit increases. d. should take an action if its benefit increases.

c

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending Elite U is: Select one: a. $15,000 b. $50,000 c. $70,000 d. $20,000

c. If Larry attends Elite U, he not only has to pay $50,000 in out-of-pocket expenses, but he also has to give up the value of his next-best option. To determine the value of his next best option, note that the value to Larry from attending State College (net of tuition) is $40,000 - $20,000 = $20,000. And, his value from attending NoName U (net of tuition) is $15,000 - 0 = $15,000. So going to State College is his next best option, and his opportunity cost of going to Elite U is $50,000 + $20,000 = $70,000.

Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing, and farming. Which of the following statements about Forest is true? Select one: a. Forest is not required to make trade-offs because he is self-sufficient. b. Forest doesn't have to consider costs and benefits. c. Forest has unlimited resources. d. Forest has to make trade-offs.

d

Normative economic principles are concerned with how people ________ make decisions while positive economic principles are concerned with how people ________ make decisions. Select one: a. in power; in ordinary life b. do; should c. in ordinary life; in power d. should; do

d

Refer to the accompanying table below. According to the Cost-Benefit Principle, how many units of this activity should be carried out? ( look at the chart on the quiz) a. 1 b. 4 c. 6 Three units of the activity provide a net benefit (total benefit - total cost) of $130, which is the highest of all the options given. Also, note that marginal benefit is greater than marginal cost for the first three units, but marginal benefit is less than marginal cost for units 4, 5 and 6. d. 3

d

The average cost of 4 units of this activity is: Select one:(chart) a. $40 b. $30 c. $20 d. $25

d

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State College is: Select one: a. $15,000 b. $30,000 c. $20,000 d. $35,000

d. If Larry attends State College, he not only has to pay $20,000 (= $30,000 - $10,000) in out-of-pocket expenses, but he also has to give up the value of his next-best option. To determine the value of his next best option, note that the value to Larry from attending Elite U (net of tuition) is $60,000 - $50,000 = $10,000. And, his value from attending NoName U (net of tuition) is $15,000 - 0 = $15,000. So going to NoName U is his next-best option, and his opportunity cost of going to State College is $20,000 + $15,000

An editorial in the paper argues that a person only should be allowed to attend school if the marginal cost of educating that person is less than the marginal benefit of educating that person. The writer's reasoning is an application of: Select one: a. economic naturalism. b. negative economics. c. positive economics. d. normative economics.

normative economics