Econ: Unit 1 Questions

You plan to travel in Europe this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$7 comma 000 for the​ summer, and you​ won't be able to live at home for free. The cost of transportation is ​$2 comma 000​, visas cost ​$300​, and living expenses are ​$2 comma 000. What is the opportunity cost of your plan to travel in​ Europe? Your opportunity cost is ​$

$11,300

Imagine the price of a cup of coffee is $2. The marginal benefit of the first cup is $7, the second cup is $5, the third cup is $1, and the fourth cup is -$3. Answer the following questions with this information: 1. What is the marginal cost of the second cup of coffee? 2. What is the marginal net benefit of the second cup of coffee? 3. What is the total benefit of 4 cups of coffee? 4. How many cups of coffee should you buy?

1. $2 (the marginal cost is the same for every cup purchased since the price is a constant $2) 2. $3 (MB of 2nd cup = $5 minus MC of second cup = $2, so $5 - $2 = $3) 3. $10 ($7 + $5 + $1 + (-$3) = $10) 4. 2 cups (continue to purchase as long as MB > MC or as long as marginal net benefit is positive)

Choose the statement that is incorrect. A. A rational choice will turn out to have been the best choice after the event. This is the correct answer.B. Only the wants of the person making a choice are relevant to determine its rationality. C. Economists view the choices that people make as rational. D. A rational choice is one that compares costs and benefits and achieves the greatest benefit over cost for the person making the choice.

A rational choice will turn out to have been the best choice after the event.

People make rational choices by comparing​ _______. A. the firms that make two similar goods B. the countries in which a good is produced C. whether a purchase should be made during an economic expansion or an economic recession D. benefits and costs

Benefits and costs

An incentive is​ _______. A. available to individuals and businesses but not to governments B. a reward that encourages an action or a penalty that discourages an action C. a boost in every student's grade D. a reward that encourages an action but not a penalty that discourages an action

a reward that encourages an action or a penalty that discourages an action

Marginal benefit​ ______. A. does not change as more of a good is consumed B. is equal to the slope of the PPF C. from a good or service is the benefit received from consuming one more unit of it D. describes opportunity cost

from a good or service is the benefit received from consuming one more unit of it

You want to watch football and play cards. You think hard about how to allocate the next hour between watching football and playing cards and decide to watch football for the first 35 minutes and then spend 25 minutes playing cards. Your decision is an example of​ _______. A. making a choice such that the marginal cost exceeds the marginal benefit B. good time management C. making a choice at the margin D. misallocating your time

making a choice at the margin

An economy produces ceramic plates. If less than the efficient quantity of ceramic plates is produced ​_______. A. marginal benefit exceeds marginal cost B. it is not possible to be producing at a point on the PPF C. marginal cost equals marginal benefit D. marginal cost exceeds marginal benefit

marginal benefit exceeds marginal cost

Are either or both of these newspaper headlines positive or normative​? 1. The minimum wage should be increased. nothing 2. Nuclear energy costs less than oil. nothing Statement 1 is a​ ______ statement because it​ ______ be tested. A. normative​; cannot B. positive​; can C. normative​; can D. positive​; cannot Statement 2 is a​ ______ statement because it​ ______ be tested. A. positive​; cannot B. positive​; can C. normative​; cannot D. normative​; can

normative; cannot positive; can

Allocative efficiency occurs when​ ______. A. we are producing at a point on the PPF that we prefer above all other points B. we cannot produce more of any good without giving up some other good C. marginal benefit exceeds marginal cost D. the difference between marginal benefit and marginal cost is maximized

we are producing at a point on the PPF that we prefer above all other points

Which of the following pairs does not​ match? A. Labor​; rent B. Land​; rent C. Capital​; interest D. Entrepreneurship​; profit

labor; rent

Factors of production are grouped into four​ categories, which are​ _______. A. ​land, labor,​ capital, and entrepreneurship B. ​land, capital, human​ capital, and entrepreneurship C. ​capital, human​ capital, financial​ capital, and labor D. ​land, labor,​ capital, and human capital ​______ is an example of​ ______. A. The groundskeeper at a golf club​; entrepreneurship B. Hoover dam​; land C. The Florida Everglades​; capital D. Upper A bus driver​; labor

land, labor, capital, and entrepreneurship the bus driver; labor

Think about the following news items. Which items involve a microeconomic issue and which involve a macroeconomic​ issue? A. Are iTune downloads killing CDs question mark B. Will a cut in the income tax rate encourage people to work longer hours question mark C. It would be better if the United States spent more on the environment and less on space exploration D. Why are production and incomes stagnating in Japan question mark Statement A involves a​ ______ issue. Statement B involves a​ ______ issue.

micro​; micro micro​; macro

Suppose you have been offered a choice of two part-time jobs: 10 hours a week stacking shelves at the supermarket for $10 dollars an hour; or 12 hours a week working in the bar of the local hotel for $8 per hour plus a free case of beer once a week. Assuming that you will take one and only one of the jobs, what is: the opportunity cost of taking the supermarket job? the opportunity cost of taking the hotel job?

$96 plus a case of beer $100 plus 2 hours of leisure

In one​ hour, Sue can produce 40 caps or 4 jackets and Tessa can produce 80 caps or 4 jackets. ​Sue's opportunity cost of producing a cap is​ ______ jackets and​ Tessa's opportunity cost of producing a cap is​ ______ jackets. A. 0.1​; 0.05 B. 20.0​; 10.0 C. 10.0​; 20.0 D. 0.05​; 0.1 ​______ has a comparative advantage in producing caps. If Sue and Tessa each specialize in producing the good in which they have a comparative advantage and trade 1 jacket for 15 ​caps, ______. A. Sue​; both Sue and Tessa gain B. Sue​; Tessa gains but Sue loses C. Tessa​; Sue loses but Tessa gains D. Tessa​; both Sue and Tessa gain

0.1​; 0.05 Tessa​; both Sue and Tessa gain

1. In terms of berries, what is the opportunity cost of going from 4 rabbits to 5 rabbits? 2. Is it possible to produce outside the PPF? Why or why not? 3. Is producing on point B better than producing on point A?

1. 100 berries (In the time it takes to get the 5th rabbit, you could have harvested 100 berries) 2. No, the PPF is the physical limit of the resources available. 3.We do not know that, since the term "better" is normative. Perhaps you are vegetarian and do not require any rabbits!

1. Franny can write 10 pages in one hour or wash 30 dishes in one hour. Douglan can write 5 pages in one hour or wash 15 dishes in one hour. Who has the absolute advantage in writing pages? a.Franny b.Douglan c. Both d. No absolute advantage exists 2. Franny can write 10 pages in one hour or wash 30 dishes in one hour. Douglan can write 5 pages in one hour or wash 15 dishes in one hour. Who has the comparative advantage in writing pages? a.Franny b.Douglan c. Both d. No absolute advantage exists Note: Answers to practice questions on the next page

1. Franny; she can produce more pages than Douglan 2. No absolute advantage exists (having the same opportunity cost means neither has the ability to produce something cheaper, therefore "both" would be incorrect)

Normative or Positive 1. Cell phones make people more productive. 2. Certain vaccinations cause autism. 3. The trump administration is "making america great again." 4. Gymnastics is the most difficult sport on the body because it has the highest injury rate compared to all other sports. 5. The color green is a mix between the colors red and yellow.

1. Normative (need to better define "productive") 2. Positive (but no link has been shown between the two from countless studies, so highly likely to be false) 3. Normative (define "great") 4. Positive (can be shown to be true or false) 5. Positive (but false)

You plan to go to school this summer. If you​ do, you​ won't be able to take your usual summer job that pays ​$7 comma 000 for the summer. The cost of tuition is ​$3 comma 000 and textbooks cost ​$300. You live with your​ family, which covers your living expenses of ​$1 comma 000. What is your opportunity cost of going to school this​ summer? Your opportunity cost of going to summer school is ​$

10,300

You have four options to spend your next hour: 1. Jogging (valued at $34); 2. Watching a show (valued at $42); 3. Baking a cake (valued at $29) and doing homework for your online class (valued at $300). What is the opportunity cost (in terms of dollar value AND activity) of choosing: Jogging? Watching a show? Baking a cake? Homework for online class?

Homework for online class; $300 Homework for online class; $300 Homework for online class; $300 Watching a show ; $42

(state whether the PPF shifts or not, and explain why.) New driverless car technology is available for consumer purchase Capital machinery that was produced in a previous period lies unused An earthquake splits the 5- freeway The U.S. Government decides to seize all private property in order to expand nuclear missile testing sites A sudden influx of working-age immigrants floods into the US

Outward Shift ; better technology No Shift ; resources are simply unused so the capacity to produce has not changed Inward Shift ; fewer resources Inward Shift ; poorer rules of the game Outward Shift ; increase in resources

Choose the correct statements. a. There is no relationship between the opportunity cost of producing an additional good measured on the x dash axis and the opportunity cost of producing an additional good measured on the y dash axis. nothing b. Opportunity cost is a ratio. nothing nothing c. Opportunity cost of a good is the decrease in the quantity produced of one good divided by the increase in the quantity produced of another good as we move along the PPF . nothing d. Opportunity cost of a good cannot be accurately measured along a PPF because the PPF shows only two goods. nothing nothing A. Statements c and d are correct. B. Statements a and d are correct. C. Statements a and c are correct. D. Statements b and c are correct.

Statements b and c are correct.

Choose the correct statement. A. The opportunity cost of an activity you do not enjoy is zero. B. The opportunity cost of doing more of an activity is the opportunity cost of the activity. C. The opportunity cost of an activity is​ constant, regardless of the time of day at which you pursue the activity. D. The opportunity cost of something is the​ highest-valued alternative that must be given up to get it. ​Pam, Pru, and Pat are deciding how they will celebrate the New Year. Pam prefers to go on a​ cruise, is happy to go to​ Hawaii, but does not want to go skiing. Pru prefers to go​ skiing, is happy to go to​ Hawaii, but does not want to go on a cruise. Pat prefers to go to Hawaii or to take a​ cruise, but does not want to go skiing. Their decision is to go to Hawaii. What is the opportunity cost of the trip to Hawaii for each of​ them? A. The opportunity cost for Pam and Pat is the airfare to Hawaii minus the cost of a cruise and for​ Pru, it's the airfare minus the cost of a ski trip. B. The opportunity cost for each of them is the airfare to Hawaii. C. The opportunity cost for Pam and Pat is a cruise and for Pru it is skiing. D. The opportunity cost for each of them is the airfare to Hawaii minus the cost of a cruise.

The opportunity cost of something is the​ highest-valued alternative that must be given up to get it. The opportunity cost for Pam and Pat is a cruise and for Pru it is skiing.

Economics is all of the following except​ _______. A. a subject that arises because we want more than we can get B. a subject that studies choices C. a subject that tells countries what goods they must trade D. a social science

a subject that tells countries what goods they must trade

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative​ advantage, ______ will gain from that trade because ​ ______. A. both​ countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs B. only the United​ States; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change C. only​ Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change D. neither​ country; their consumption possibilities will not change

both​ countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs

Economic growth comes from​ _______. A. capital accumulation and technological advance B. capital accumulation and the avoidance of opportunity cost C. people being willing to increase their skills which makes economic growth free D. producing more goods than people want to consume

capital accumulation and technological advance

Economic growth​ ______ overcome scarcity because​ ______. A. does​ not; we can produce more goods and services but it is still impossible to satisfy all our wants B. ​does; with economic growth the PPF rotates outward and eventually becomes a horizontal line C. does​ not; economic growth requires capital accumulation and technological change D. ​does; we will eventually reach the point where we have too much

does​ not; we can produce more goods and services but it is still impossible to satisfy all our wants

The Casino has given you $100 worth of complimentary chips which must be wagered this evening. There are two tables - roulette and blackjack. The expected value of $100 bet on roulette is $83, and the expected value of $100 bet on blackjack is $86. What is: the opportunity cost of betting the chips on roulette? the opportunity cost of betting the chips on blackjack?

expected opportunity cost of $86 expected opportunity cost of $83

Human capital ​ _______. A. is always used in the self dash interest B. is a gift of nature C. remains constant over time D. grows as people gain work experience

grows as people gain work experience

Indicate whether each of the following news items is a positive or a normative statement. 1. The number of farms has decreased over the last 50 years. 2. Teenagers shouldn't be permitted to buy cigarettes. 3. Nuclear energy is cleaner than coal and oil based energy. 4. We need more police on inner dash city streets. Statement 1 is a​ ______ statement, and statement 2 is a​ ______ statement. A. positive​; positive B. positive​; normative C. normative​; normative D. normative​; positive Statement 3 is a​ ______ statement, and statement 4 is a​ ______ statement. A. normative​; positive B. normative​; normative C. positive​; positive D. positive​; normative

positive; normative positive; normative

------ efficiency occurs when we produce goods and services at the lowest possible cost. -------efficiency occurs when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit. All points on the PPF are points of​ ______ efficiency. When we produce at the point on the PPF that we prefer above all other points we achieve​ ______ efficiency. A. ​allocative; allocative B. ​allocative; production C. ​production; allocative

production Allocative ​production; allocative

Choose the definition that gives the best overview of economics. Economics is the social science that studies the choices​ _______. A. made by bankers B. that we make when we trade in markets C. made by households D. that we make as we cope with scarcity

that we make as we cope with scarcity

You can spend the evening studying or you can go to see a movie. You have an incentive to spend the evening studying if​ ______. A. the marginal benefit of going to see a movie is less than the marginal benefit of spending the evening studying B. no tradeoff occurs by spending the evening studying C. the marginal benefit of spending the evening studying is greater than the marginal cost of spending the evening studying D. the marginal benefit of spending the evening studying is greater than the marginal cost of going to see a movie

the marginal benefit of spending the evening studying is greater than the marginal cost of spending the evening studying

Veronica has two tacos for lunch. The marginal benefit that Veronica receives from the second taco is​ _______. A. the total benefit she receives from eating two tacos B. the minimum amount that she is willing to pay to produce the second taco C. the total benefit she receives from producing two tacos D. the maximum amount that she is willing to pay for the second taco

the maximum amount that she is willing to pay for the second taco

The what​, how​, and for whom questions in economics are questions about​ ______. A. what are the factors of​ production, how do we pay the factors of​ production, and who supplies the factors of production B. what goods and services do we produce in the United States and what goods and services do we buy from other​ countries, how do we ship goods and services into the United States from​ abroad, and who benefits from shipping goods into the United States C. what incomes do we pay the people who produce the goods and services we​ consume, how do firms generate enough income to pay their​ employees, and who wants the goods and services that are produced D. what goods and services do we​ produce, how do we use the factors of production to produce these​ goods, and who consumes the goods and services that are produced

what goods and services do we produce, how do we use the factors of production to produce these goods and who consumes the goods and services that are produced

In one​ hour, Sue can produce 70 caps or 21 jackets and Tessa can produce 50 caps or 25 jackets. Suppose that Tessa buys a new machine for making jackets that enables her to make 125 jackets per hour.​ (She can still make only 50 caps per​ hour.) Now​ ______ has a comparative advantage in producing jackets. ​______ from trade. A. ​Sue; both Sue and Tessa gain B. ​Tessa; both Sue and Tessa gain C. ​Sue; Tessa gains but Sue loses D. ​Tessa; Sue loses but Tessa gains Sue and Tessa are ------- to trade 1 jacket for 4 caps.

​Tessa; both Sue and Tessa gain no longer willing

Question Facts In an​ hour, Simon can catch 20 pounds of pickerel or pick 10 pounds of strawberries. In an​ hour, Fred can catch 10 pounds of pickerel or pick 10 pounds of strawberries. The opportunity cost of catching a pound of pickerel is​ ______ for Simon than for Fred​, and the opportunity cost of picking a pound of strawberries is​ ______ for Simon than for Fred. A. ​lower; lower B. ​higher; higher C. ​lower; higher D. ​higher; lower So​ ______ has a comparative advantage in producing​ ______. A. Fred​; pickerel B. Fred​; both pickerel and strawberries C. Simon​; strawberries D. Simon​; pickerel

​lower; higher Simon​; pickerel