CHOICE IN A WORLD OF SCARCITY QUIZ

Denasia is planning a cruise to the Bahamas and has a budget for new evening wear of $400. The average price for a pair of shoes is $50 while the average price for an evening dress is $100. If Denasia already has 3 dresses purchased for her cruise, what is the opportunity cost of buying one more dress?

2 pairs of shoes

Consider the graph of the production possibility frontier for country X. What would be a combination of watches and MP3 players that would meet the allocative efficiency of a country?

Any combination on the production possibilities frontier that brings the highest level of satisfaction to meet the needs of the people in the economy.

Identify the positive statement among the following statements.

College tuition is higher for out-of-state students than it is for in-state students.

Consider the graph of the production possibility frontier for country Z below. A combination of clothing and cell phones that would meet the productive efficiency would be:

E

Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of one additional watch is

Greater at C than at B. (Wrong) Greater at B than at C

Which is a true statement about marginal benefit?

It is the difference (or change) in cost of a different choice.(wrong)

Which of the following statements is normative?

Retired professionals should work less and get out more.

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 were left behind.

A technology company starts a program dedicated to training high school students in the use of the latest computer programming languages. How can the company justify creating and funding such a program since it is not about its primary products?

The money spent will boost the company's image and create potential employees with needed skills.

How does a production possibilities model differ from a budget constraint model?

The production possibilities model demonstrates diminishing returns.

Julie's entertainment budget for the next six months is $150 per month. She enjoys watching the latest movies and loves the ballet. A movie ticket costs $15 while a ballet ticket costs $35. This month Julie already attended one ballet show and three movies. If Julie decides she would rather see ballet shows for the remainder of this month, how many ballet shows can she attend and stay within her budget?

Two ballet shows.

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 Costa Rica, Canada has

a comparative advantage with corn.

The house that Jeanne inherited from her mother can rent for $1500/month, but Jeanne decides to allow her brother to stay there for only $500 per month. This decision carried with it

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

Kayden decided to attend college and gain a degree in accounting. He is now starting his degree. The yearly cost of tuition is $10,000 and he left his auto mechanic shop management job giving up a $32,000 a year to attend college. Kayden's decision resulted in

an opportunity cost to attend college of $42,000 per year.

In order to satisfy as many wants as possible, a society must achieve productive efficiency

because otherwise output may go to where it is less valued. (wrong) --- its not the constant one too

Self-interest can include more than a concern for oneself. To the extent that the happiness of others contributes significantly to the our own happiness, actions taken in our own self-interest may have benefits for

close friends and family.

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

every additional missile will reduce consumer goods production by more and more.

The theory of rational behavior

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

A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month, a sunk cost, must be paid. If the bed & breakfast operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,

it is best to ignore sunk costs and keep the bed & breakfast operating.

Making an economically rational decision requires

one to weigh prospective benefits and costs of each option.

The production possibilities model shows an inverse relationship between the amount of one thing and the amount of something else that can be produced because

production of different types will compete for limited resources.

Marginal benefit is

the additional benefit that one more unit of something will provide.

Marginal cost is

the cost of obtaining or producing one more unit of something.

When choosing a college major in a rational way, Misty should consider

the cost of the degree and the benefit each degree would bring.

Budget constraints illustrate scarcity. They are based upon

the fact that we have limited income and we have to pay for goods and services

The agricultural extension agent told the farmer that one more crop-dusting will likely add a ton of additional wheat to the harvest. The rational farmer then calculated the selling price of a ton of wheat, since he would decide to crop-dust again if and only if

the marginal benefit is greater than the marginal cost of an additional crop-dusting.

Willa and Westley are siblings who built a hair salon business from the ground up. They are now contemplating opening an additional salon location. The estimate to open an additional salon would mean adding $1 million in expenses and a revenue of $2 million in total over the next 5 years (all other things equal). Willa and Westley decide

to take on the new salon because the expected marginal benefit ($2 million over 5 years) is greater than the estimated marginal cost ($1 million).

Normative statements are based upon

value judgments