Macroeconomics Chapters 1 & 2

Which of the following sayings best reflects the concept of opportunity cost?

"Time is money."

Refer to Figure 2-10. If this economy put all available resources into the production of bananas, it could produce

400 bananas and no baseballs.

The economic way of thinking stresses that

incentives matter--when an option becomes less costly, people will be likely to choose it.

Jacob and Mason go to a diner that sells burritos for $5 and tacos for $3. They agree to split the lunch bill evenly. Mason chooses a taco. The marginal cost to Jacob of ordering a burrito instead of a taco is

$1.

Liam wants to buy some milk and a box of cereal. If Liam buys 4 gallons of milk at $3.00 per gallon, the box of cereal costs $2.00. If he buys 5 gallons of milk, the box of cereal is free. For Liam, the marginal cost of buying a fifth gallon of milk is

$1.00

Suppose an airline ticket from Charlotte to Dallas costs $525. A bus ticket is $325. Traveling by plane will take 5 hours, compared with 25 hours by bus. Thus, the plane costs $200 more but saves 20 hours of time (Hint: Note how we are "thinking at the margin" here by looking at the changes). Other things constant, an individual will gain by choosing air travel if, and only if, each hour of her time is valued at more than

$10 per hour.

Which of the following attributes of trade explain why it is important for economic prosperity?

- Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. - Trade moves goods from people who value them less to people who value them more. - Trade makes it possible to produce a larger output as a result of lower per unit costs that often accompany large-scale production. - Trade makes it possible to produce a larger output as a result of gains from division of labor and specialization. (All of the above.)

While waiting in line to buy two tacos at 75 cents each, and a medium drink for 80 cents, Emma notices that the restaurant has a value meal containing three tacos and a medium drink all for $2.50. For Emma, the marginal cost of purchasing the third taco would be

2o cents.

Refer to Figure 2-10. If the economy moves from point C to point B, then which of the following statements is correct?

The opportunity cost of each additional baseball is 2 bananas.

In a market economy,

a larger income for one person means it is possible for others to earn more too.

When the Noles football team is winning by a lot of points after halftime, they often play their second and third team players. One of the coaches notices that when the third team plays that the Noles wins by a bigger margin than when just the first team plays. He recommends that the third team see more playing time as a result. What is wrong with his way of thinking?

association is not causation.

When private ownership rights are well-defined and enforced, owners

can be held accountable for damage to others through misuse of their property.

The basic difference between macroeconomics and microeconomics is that

microeconomics is concerned with individual markets and the behavior of people and firms, while macroeconomics is concerned with aggregate markets and the entire economy.

The expression, "There's no such thing as a free lunch," implies that

opportunity costs are incurred when resources are used to produce goods and services.

Melanie decided to sleep in today rather than attend her 9 a.m. economics class. According to economic analysis, her choice was

rational if Melanie values sleep more highly than the benefit she expects to receive from attending the class.

The consequences of an economic change that are not immediately identifiable but are felt only with the passage of time are known in economics as

secondary effects.

Middlemen, such as grocers, stockbrokers, and realtors

specialize in reducing transaction costs.

The Latin phrase "ceteris paribus" means

that other potential causes are assumed to remain constant.

Economics is primarily the study of

the choices we must make among alternatives because of scarcity.

Refer to Figure 2-10. A movement from point C to point D could be caused by

unemployment.