Quiz 1 - Chapter 1: Exploring Economics

Which statement describes the equity-efficiency trade-off?

Actions intended to make economic outcomes fairer may cause efficiency to decrease.

Which demonstrates a scenario with no opportunity cost?

All of these scenarios have an opportunity cost.

Britney, Jimmy, Flea, and Cindy are trying to form a band. They each have some basic skills on most instruments, so their current plan is for each of them to rotate among vocals, guitar, bass, and drums. After a year of practice and rehearsals the band still sounds awful. Britney cannot keep a steady beat when on bass or drums, Flea sounds terrible on everything except the bass, nobody except Jimmy can remember all the chords on guitar, and even Cindy's own mother thinks her singing sounds like a dying cow. At their current rate, they expect it will be several years before they are good enough to land their first paid performance. None of them have enough money saved up to last that long. They all know you are taking economics and ask your advice. What would you say to them?

Have each member specialize in the role that they are best in to take advantage of benefits from specialization.

Which scenario would least likely change an individual's behavior?

In an effort to make people eat healthier, the city of Bakersville tells its residents to eat wheat bread instead of white bread.

Megan has a 1 hr gap in her course load for the fall semester. There are two courses available for her to take at that time: reading piano sheet music and beginning rock climbing. She does not have any experience with piano or rock climbing. In the end, she decides to enroll in the rock climbing course, despite her fear of heights. Identify which activity exhibits a potential trade-off with enrolling in rock climbing.

Learning to read piano sheet music

As a result of severe recession, the total output, or gross domestic product, of a nation falls by 4 percent.

Macroeconomics

Increased consumer spending causes the national unemployment rate to fall.

Macroeconomics

Increased consumer spending causes the rate of inflation to rise.

Macroeconomics

A tax on tires increases the price of tires plaid by car owners.

Microeconomics

Optimism about future car sales leads General Motors to hire more auto workers.

Microeconomics

Robotic technology reduces the demand for auto workers.

Microeconomics

During the summer, the largest computer game retailer has a massive sale. As prices for computer games fall, consumers purchase more games, ceteris paribus. a. What does the term ceteris paribus mean in this context? b. Why, if at all, is the ceteris paribus condition important in economic analysis?

a. Holding all else equal (unchanged) b. It allows the analysis of how a single change affects an economic environment

Suppose that the video game company Ultravision releases a new game called "Call of Obligation: Modern Combat 3." This can be analyzed using the tools from both microeconomics and macroeconomics. Classify each item below according to whether it represents an application of microeconomics or macroeconomics. a. Is Ultravision able to sell all of the "Call of Obligation" games it produces or does it need to produce more? b. How does Ultravision choose to market "Call of Obligation." c. How much will Ultravision pay the developers of the game? d. How much less economic output occurs countrywide because workers call in sick to stay home and play either "Call of Obligation" or another video game? e. How much will Ultravision charge for "Call of Obligation?" f. Have the millions of dollars that people have spent on video games worldwide affected the gross domestic Product (GDP) in their respective countries? g. Has the country's unemployment rate changed as Ultravision hired a huge team of workers to develop the game?

a. MICROeconomics b. MICROeconomics c. MICROeconomics d. MACROeconomics e. MICROeconomics f. MACROeconomics g. MACROeconomics

Suppose the University Health Center receives flu vaccinations at the beginning of each flu season, and that they offer these vaccines for the market price of $20.00 each. Assume that college students have varying budgets. Some have some money to spare, some are on a very tight budget. Keep in mind that some students have pre-existing conditions, such as asthma and diabetes, that place them at high risk for the flu. a. Who will receive the vaccines if the University Health Center sells them for the $20.00 market price? b. Suppose the school sells all of its vaccines at the market price of $20.00. What hast managed to maximize? Suppose now that the school wishes to make sure no students with diabetes or asthma go without the drug because they cannot afford it. Because it does not know the budget of each student, the Health Center decides to offer vaccines free to students who can provide a doctor's note stating they have a pre-existing condition. c. The school is now seeking a greater degree of:

a. The students who will pay $20.00 for them b. Efficiency c. Fairness

The day-to-day living conditions of modern Americans are very different from what they were in the 20th century. While doing research for an economics project, Charlie discovers that more households today, as compared to households 100 years ago, have electricity, air conditioning, and a car. a. Which of the following explains why modern Americans enjoy a higher standard of living than Americans 100 years ago? b. In which field do researchers focus on investigating the phenomena described?

a. There has been economic growth in our society b. economics

Each scenario illustrates a principle of economics. Classify each scenario according to the principle that best fits it. a. An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. The company compares how much adding another worker will improve the product to the additional cost. b. Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time. c. On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store or a flat screen TV at another store, and buying one means losing out on the ability to purchase the other.

a. marginal decisions b. resource scarcity c. opportunity cost

Determine which economic principle is illustrated by each scenario. a. The owner of a snow cone trailer realizes that the demand for snow cones is low during the winter, and closes shop until the temperature warms back up near summertime. b. The local river has so much pollution that three-eyed fish are forming. The government responds by regulating the amount of chemicals that can be dumped into the river. c. At a high-end restaurant, the restaurant owner has one chef at a meat station, one chef at a vegetable station, and one chef, who has an artistic eye, plate the food she is given. The result is increased service speed, and the kitchen is able to serve more customers in an evening. d. During the summer, a bumper crop of oranges in Florida causes a surplus in the supply of oranges nationwide. As a result, prices fall to compensate for the surplus and consumers enjoy the fruits of the farmers' labor.

a. market efficiency b. government intervention c. specialization d. equilibrium

Determine if the items represent an example of positive economics or normative economics. a. The richest 1% of Americans should pay more taxes than the rest of the 99%. b. A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient. c. As, minimum wage increases, the prices of all goods and services also tends to increase. d. Social welfare spending in Sweden occupies too large a portion of the national budget.

a. normative economics b. positive economics c. positive economics d. normative economics

Please select the economic term that is best described by each statement. a. People have limited resources. b. Everything you do requires giving up something (time, money, etc.).

a. scarcity b. tradeoffs

Eliminating political conflict

not a primary macroeconomics policy goal

Rising living standards

not a primary macroeconomics policy goal

To calculate how much urban residents are willing to pay to protect biodiversity

not a primary macroeconomics policy goal

To set the optimal price for a pound of peaches

not a primary macroeconomics policy goal

Low inflation

primary macroeconomics policy goal

Low unemployment

primary macroeconomics policy goal