Principles of Economics

An implication of scarcity is that:

people must make trade off

Martha and Sarah have the same preferences and incomes. Just as Martha arrived at the theater to see a play, she discovered that she had lost the $10 ticket she had purchased earlier. Sarah also just arrived at the theater planning to buy a ticket to see the same play when she discovered that she had lost a $10 bill from her wallet. If both Martha and Sarah are rational and both still have enough money to pay for a ticket, is one of them more likely than the other to go ahead and see the play anyway? A. Sarah and Martha would make the same decision B. Sarah is more likely to see the play C. Martha is more likely to see the play

Sarah and Martha would make the same decision

The opportunity cost of an activity includes the value of:

The next best alternative that must be fore gone

If demand increases and supply decreases, the change in the equilibrium price will be ______, and the change in the equilibrium quantity will be ______.

positive; uncertain

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is:

$35

You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. What is the opportunity cost of going to the concert?

$36

For the fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. if you eat all of your meals, your average cost for animal is $600/150

$4

Larry was accepted at three different graduate schools, and must choose one. Elite U cost $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State college cost $30,000 per year, and offered Larry annual $10,000 scholarship. Larry valves attending State College at $40,000 per year No Name U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry valves attending No Name at $15,000 per year Larry's opportunity cost of attending Elite U is:

$70,000

Refer to the table below. The marginal cost of the 4th unit of activity is: Units of Activity Total cost Total Benefit 0 $0 $0 1 $2 $12 2 $6 $22 3 $12 $30 4 $20 $36 5 $30 $40 6 $42 $42 7 $56 $43

$8

Refer to the table from #13. According to the cost-Benefit principle; how many units of this activity should be carried out?

3 units

If a country's economic decisions are made by an individual or a small number of individuals, then it has a: A. centralized economy. B. free-market economy. C. capitalist economy. D. open economy.

A. centralized economy.

Which branch of economics is most likely to study differences in countries growth rates? A. macroeconomics B. experimental economics C. microeconomics D. normative economics

A. macroeconomics

33. if pencils and paper are complements for most consumers, then if the price of paper increases, you would expect A. the equilibrium price and quantity of pencils to fall B. the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise C. the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall D. the equilibrium price and quantity of pencils to rise

A. the equilibrium price and quantity of pencils to fall

29. if the price of rubber (an input to the production of tires) increase: A. the supply of tires will decrease B. the demand for tires will decrease C. the supply of tires will increase D. the demand for tires will increase

A. the supply of tires will decrease

20. The entire group of buyers and sellers of a particular good or service makes up: A. the equilibrium price and quantity B. The market C. the demand curve D. the supply curve

B. The market

The Cost-Benefit Principle indicates that an action should be taken if and only if: A. Its costs are small B. its benefits exceed its costs C. its benefits are a result of its costs. D. its benefits are positives

B. its benefits exceed its costs

Suppose Bianca buys a used a textbook from Sebastian for $55. If Bianca's surplus from this transaction was $10, we can infer that:

Bianca's reservation price was $65.

27. Suppose one observes that when the price of peanut butter increases, the demand for jelly increases. One should conclude that A. peanut butter and jelly are normal goods B. Peanut butter and jelly are complements C. peanut butter and jelly are substitutes D. peanut butter and jelly are inferior goods

C. peanut butter and jelly are substitutes

22. A seller's reservation price is generally equal to: A. the seller's average cost B. the buyers reservation price C. the seller's marginal cost D. The market price

C. the seller's marginal cost

21. As coffee becomes more expensive, Joe starts drinking tea instead of coffee. This is called A. a decrease in reservation price B. the income effect of a price change C. the substitution effect of a price change D. a decrease in demand

C. the substitution effect of a price change

Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing and farming. Which of the following statements about Forest is true? A. Forest is not required to make trade-offs because he is self-sufficient B. Forest doesn't have to consider costs and benefits C. Forest has unlimited resources D. Forest has to make trade-offs

D. Forest has to make trade-offs

23. Equilibrium price and quantity are determined by: A. supply B. demand C. government regulations D. both supply and demand

D. both supply and demand

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of: A. Rational choices because saving 40% is better than saving 4% B. inconsistent reasoning because prices are sunk costs C. the proper application of the Cost-Benefit Principle D. inconsistent reasoning; saving $20 is saving $20

D. inconsistent reasoning; saving $20 is saving $20

26. if the demand for a good decreases as income decreases, then the good is a(n) A. substitute good B. Complementary good C. inferior good D. normal good

D. normal good

17. Jody has purchased a non-refundable $75 ticket to attend a Miley Cyrus concert on Friday night. subsequently, she is asked to go out dinner at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going out to dinner, the opportunity cost of going out to dinner should include: A. only the cost of concert ticket B. neither the cost of the ticket nor the entertainment value of the concert C. the cost of the ticket plus the entertainment value of the concert D. only the entertainment value of the concert

D. only the entertainment value of the concert

Suppose that the equilibrium price of T-shirts increases and the equilibrium quantity of T-shirts decreases. This is best explained by a(n):

Decrease in the supply in t-shirts

Suppose Mary is willing to pay up to $15,000for a used Ford pick-up truck. If she buys one for $12,000 her _____ would be _____.

Economic surplus; $3,000

The marginal benefit of an activity is the

Extra benefit associated with an extra unit of the activity

Your scholarship depends on your maintaining a 3.5 cumulative GPA Your GPA for last semester was 3.6, which brought down your cumulative GPA down. what must be true?

Last semester grades were lower than your overall GPA

Your paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?

No, the benefit of going to the concert is less than the cost

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay Part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation. which your parents are forcing you to attend. The Chicago-Atlanta round trip air-forces are $450. should you use the frequent flyer coupon to go to Miami?

No, your benefit is less than your cost

Suppose you observe a decrease in the equilibrium price and quantity of corn. Of the options listed below, this is best explained by:

a fall in consumer income assuming corn is a normal good.

If the demand for computers increases as consumers' incomes rise, then computers are:

a normal good.

Suppose a new study highlights the health benefits of eating bacon. At the same time, suppose the cost of producing bacon falls. Given these changes, you should expect to see:

an increase in the equilibrium quantity of bacon, but it's hard to say what will happen to the equilibrium price.

If a country's economic decisions are made by an individual or small number of individuals, then it has a:

centralized economy

the marginal cost of an activity is the

change in the total cost of the activity that results from carrying out an additional unit of the activity

Suppose you camped out in front of an electronics store to be one of the 200 lucky people able to purchase the latest gaming system. You bought the system for $350. Two weeks later you see that the same system can be sold on e-Bay for $600, so you sell your system. Your market role was as a:

consumer at the electronics store and a seller on e-Bay.

Suppose supply decreases, but there is no change in demand. As the market reaches its new equilibrium:

excess demand will lead the price to rise.

Suppose demand decreases, but there is no change in supply. As the market reaches its new equilibrium:

excess supply will lead the price to fall.

The market equilibrium quantity:

is sometimes the socially optimal quantity

One thing that distinguishes normative economic principles from positive economic principles is that:

normative principles tell us how people should behave, and positive principles tell us how people will behave.

If there is an excess supply of sport utility vehicles, then:

quantity supplied is greater than quantity demanded.

The entire group of buyers and sellers of a particular good or service makes up:

the market

Janie must chose to either mow the lawn or wash clothes. if she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to _____ because it generates a _______ economic surplus

wash clothes ; bigger