Chapter 2: Scarcity and the world

Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pairs of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes?

1 Dress

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is

2 Watches

Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Canada, Costa Rica has

A comparative advantage with coffee

Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell's decision will result in

A two year opportunity cost of $40,000 after leaving her teaching position

The house that Jamalla inherited from her mother can rent for $2000/month, but Jamalla decides to allow her brother to stay there for only half of that. This decision carried with it

A zero monetary cost but a $1000 per month opportunity cost.

Which of the following statements reflects marginal decision-making?

Booking this condo in a better location is worth the extra $100

A positive statement is

Can be shown to be correct or incorrect

Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for

Close friends and family

Which of the following statements is normative?

Congress gives too many tax breaks to corporations

Making an economically rational decision requires

Considering the prospective benefits and costs to oneself

The slope of a budget constraint line is influenced by

How much one product costs compared to the otheR

The theory of rational behavior

Is an assumption that economists make to have a useful model for how decisions are made

Based on the graph of Maren's budget constraint for dresses and shoes, what accurately describes the slope of her budget constraint?

It is negative because of scarcity and the limited amount of money available to Maren

The additional benefit that one more unit of something will provide is known as

Marginal benefit

Which is a true statement about marginal cost?

Marginal cost is the difference (or change) in cost of a different choice

A budget constraint model differs from production possibilities model in that, typically

Only the production possibilities model demonstrates diminishing returns

The production possibilities model illustrates an inverse relationship between two goods or services because

Production of different types will compete for limited resources.

Which of the following statements is positive?

Social security benefits are not taxed

Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider

The benefit each major would bring and the cost of the degree

It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

The boat rental was worth the additional fish caught, regardless of how little fish we left behind

Identify the normative statement(s) among the following statement(s).

The federal government spends too much

Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,

The greater the opportunity cost will be of satisfying consumer wants

Scarcity is imposed on individual households in the form of income and

The prices of the goods that a person may purchase.

Juan has a monthly budget of $100 to spend on entertainment. A concert ticket costs $20 while a movie ticket costs $10. This month Juan has attended one concert and 5 movies so far. If Juan decides to only go to movies for the rest of the month. How many movie tickets can he afford to purchase and stay within his budget?

Three tickets

Normative statements are based upon

Value judgments