Unit 2 Key Ideas of Economics

Suppose you pay $10 for a movie ticket at your local cineplex. After watching the movie, you decide to sneak into another movie rather than buy another ticket. What is the marginal cost of the second movie? a) $0 b) $5 c) $10 d) $20

a) $0

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and Marcus is most efficient at making beaded necklaces. Jan should make bracelets and trade them for which good(s)? a) Clay pots and beaded necklaces. b) Only clay pots. c) Only necklaces. d) None of the goods.

a) Clay pots and beaded necklaces.

Mia is a little more efficient at mowing the lawn than Andrew. However, she is a much more efficient than Andrew at doing laundry. Which task should Mia specialize in on a regular basis? a) Doing the laundry. b) Both tasks. c) Mowing the lawn. d) Neither task. Submit

a) Doing the laundry.

When four roommates agree to specialize in the chores they are most efficient at, this can lead to: a) a situation in which less time is spent on chores by every roommate. b) some roommates doing many more chores than others. c) one roommate who is most efficient doing all of the chores. d) no chores getting done at all.

a) a situation in which less time is spent on chores by every roommate.

Lindsay is an inventory planner at a local retailer. She is currently making a decision as to how many units she should stock in the store based on projected demands of the consumer. She has determined that she should keep 200 units in the store because an additional unit would not sell. This is an example of: a) marginal analysis. b) market failure. c) specialization. d) opportunity cost.

a) marginal analysis.

You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer. Based on this information, what is the opportunity cost of seeing Eric Clapton? a) $0 b) $10 c) $40 d) $50

b) $10

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and Marcus is most efficient at making beaded necklaces. If these three people engage in trade in a mutually beneficial manner, who will benefit from the exchange? a) Only Jan and Martin. b) Jan, Martin, and Marcus. c) Only Jan. d) No one will benefit.

b) Jan, Martin, and Marcus.

Suppose Jesse is deciding between three different menu items at an Italian restaurant: lasagna, pizza, and ravioli. She decides that her favorite choice of the three is ravioli, with pizza second, and lasagna third. Unfortunately, the waiter informs her that they are out of ravioli, So she instead orders pizza. What is her opportunity cost of ordering pizza? a) Ravioli b) Lasagna c) Ravioli and lasagna d) There is no opportunity cost because she can come back and try the other dishes some other time.

b) Lasagna

If you pay a fixed price to enter a theme park, allowing you to ride as many roller coasters as you want, how many should you ride according to marginal analysis? a) You should ride as many times as you possibly can to reduce the average cost per ride. b) You should ride until the last ride provides no additional benefit. c) You should ride until the additional benefit of the last ride equals the admission price you paid to enter the park. d) You should ride only if the theme park does not charge admission at all. Submit

b) You should ride until the last ride provides no additional benefit.

Both Jan and Marcus can cook and wash the dishes. However, since Jan is better at cooking, Jan generally cooks while Marcus washes the dishes. This is an example of: a) marginal analysis. b) specialization. c) market failure. d) opportunity cost.

b) specialization.

Suppose a friend invites you to attend the opening day game for your favorite baseball team but you will have to miss a day of work in order to go, in which you would have earned $40 that day. Your ticket to the game cost your friend $10, and your friend treats you to another $10 worth of food and beverage. What is the opportunity cost of this choice? a) $0 b) $20 c) $40 d) $60

c) $40

Jan is most efficient at making braided bracelets, Martin is most efficient at making clay pots, and Marcus is most efficient at making beaded necklaces. Which good should Jan specialize in making? a) Clay pots b) Beaded necklaces c) Braided bracelets d) Nothing

c) Braided bracelets

Which of the following is a decision that follows the net marginal benefit principle? a) Riding a roller coaster as many times as possible at a theme park. b) Eating as much food as possible at a buffet to get your money's worth. c) Deciding whether to spend one more hour studying for an exam. d) Choosing to give up eating meat due to concerns regarding the treatment of animals.

c) Deciding whether to spend one more hour studying for an exam.

Alex loves candy and could eat it all day long. However, his weekly allowance of $5 allows him to buy only a small bag of candy. Which of the following key ideas of economics does this illustrate? a) Marginal analysis b) Market failure c) Scarcity d) Opportunity cost

c) Scarcity

Everyone benefits from street lighting, yet the marginal benefit (of an additional streetlight) to any one individual usually falls short of the marginal cost (of providing that streetlight). This is an example of: a) Individual actions whose side effects are not properly taken into account by the market b) One party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself c) The unsuitability of some goods for efficient management by markets d) regulating self-interest

c) The unsuitability of some goods for efficient management by markets

Opportunity cost is: a) only measured in dollars. b) only the value of the time spent doing the next best alternative. c) the value of the next best alternative. d) not measured in dollars.

c) the value of the next best alternative.

Because people usually exploit opportunities to make themselves better off, if the price of gasoline rises and stays high for an extended period, we expect people to: a) increase the number of miles they drive b) buy larger and less fuel efficient cars c) use more public transportation d) ride their bicycles less

c) use more public transportation

The term scarcity means that: a) wants are equal to resources. b) wants are less than resources. c) wants are greater than resources. d) wants and resources have no correlation.

c) wants are greater than resources.

Lisa is choosing between three alternatives: a) working on her job that pays 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is: a) 0 dollars. b) 20 dollars. c) 80 dollars. d) 140 dollars.

d) 140 dollars

If we classify people by income level, which group or groups must deal with scarcity? a) Only the very poor. b) The poor and the middle class. c) Only the middle class. d) All income groups, even the very rich.

d) All income groups, even the very rich.

Both Maggie and Angie can make beaded necklaces and clay bowls, but Maggie is most efficient at making necklaces. Therefore, Maggie makes necklaces and trades them for clay bowls. This is an example of: a) marginal analysis. b) market failure. c) opportunity cost. d) specialization.

d) specialization.

The price of gasoline is $2.50 per gallon at the closest gas station, but is only $2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is: a) non-existent because gas is cheaper at the farther station. b) $0.20 per gallon, the difference in price between the two gas stations. c) the cost of filling one's tank at the original price of $2.50 per gallon. d) the value of one's time and expenses to go to the farther gas station.

d) the value of one's time and expenses to go to the farther gas station.