Micro Test 1

What is Bo's opportunity cost of making 1 stromboli?

1/2 pizza

Which scenario describes studying for an economics course without applying the scarcity principle?

Chloe studies for this course and does nothing else.

Suppose Hoda is a brilliant attorney who can draft especially persuasive legal briefs. She also happens to possess some excellent administrative skills such as typing, filing, assembling binders and notes, and making reservations. Which best describes whether Hoda should hire an administrative assistant to help her?

Hoda should hire an administrative assistant because the assistant would likely have a comparative advantage in performing administrative functions.

As more people migrated West during the gold rush, what happened to the demand curve in most western markets, holding all else constant?

INCORRECT The demand curve shifted to the right.

If someone searches for a flight between Los Angeles and Chicago, he or she will find different airlines offering flights at similar prices. Why does this occur?

INCORRECT This occurs because the flights are filled primarily with workers from the largest 10 companies in each of the cities.

When the price for computers is expected to fall in the future, what happens?

The demand for computers decreases.

What would we expect to happen to the price of bagels if the price of flour decreased and the price of cream cheese decreased?

The equilibrium price of bagels will be indeterminate and the equilibrium quantity will go up.

How are changes in opportunity cost related to decision-making behavior?

The lower the opportunity cost of doing activity X, the more likely activity X will be done.

Refer to the accompanying diagram. Which of the following scenarios would explain thischange in equilibrium?

The price of a substitute of this good increased.

One way to promote a new business is to offer free items. If Jayleen were to open a restaurant and offer free food, she likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Those waiting in line place a low value on the use of their time.

For both parties to benefit from specialization and trade, the trading parties must agree on

a price somewhere between their opportunity costs of production.

Economists use the scientific method and the tools of economics to study

anything around them; the world is the economist's laboratory.

An opportunity cost is the

cost of a purchase or decision as measured by what is given up.

It is crucial to recognize that ________ and ________ are separate evaluations made at the margin.

costs; benefits

In a growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. If this fee can be refunded when someone recycles the bag, the refund acts as a(n) ________ incentive.

direct

A possible opportunity cost of NOT engaging in free trade is

economic growth.

Saudi Arabia has a comparative advantage in producing oil because it

has specialized in the production of oil given its natural resources.

Economics is the study of

how to allocate resources to satisfy wants and needs.

If the government wanted to give people a negative direct incentive not to save money, what would be the appropriate policy?

imposing a tax on individuals for saving their money

A positive statement

is a claim that can be tested.

A demand schedule

is a table representing the relationship between the price of a good or service and the quantity demanded.

The ________ states that the opportunity cost of producing a good always rises as one produces more of it.

law of increasing relative cost

Actions and activities are discouraged with

negative incentives

Which of the following represents an inefficient point?

point A

The set of efficient points is best described as

points on the PPF only.

An example of a direct positive incentive is

providing a commission for sales.

When both supply and demand shift to the right, equilibrium

quantity always rises.

The market for footballs is perfectly competitive. If all else is held constant and the price of leather decreases, we would expect that the equilibrium quantity of footballs would ________ and the equilibrium price would ________.

rise; fall

Entrepreneurs are willing to take risks because

the patent and copyright system provides an exclusive right to sell the product for a period of time.

The government has been trying to encourage the use of fuel-efficient cars. One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane. This encourages people to use fuel-efficient cars because

those who place a high value on their scarce time may be encouraged to buy a fuel-efficient car to take advantage of the separate highway lane.