Assignment 1

Economics is best defined as the study of:

how people make choices in the face of scarcity and the implications of those choices for society as a whole.

Chris has a one-hour break between classes every Wednesday. Chris ca either stay at the library and study or go to the gym and work out. The decision Chris must make is:

An economic problem because Chris has only one hour,and engaging in on activity means giving up the other.

Jack has a ticket to see the Foo Fighters for which he paid $30 yesterday. He takes an unpaid day off from work to get ready for the concert. When he arrives at the concert, five different people offer him $70 for his ticket. Jack decides to keep his ticket. At the time he makes this decision, his opportunity cost of seeing the Foo Fighters is:

C) $70

Janie must choose 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 S45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore chose to ____________because it generates a ________________ economic surplus.

Wash clothes; bigger

Choosing to study for an exam until the extra benefit (e.g., improved score) equals the extra cost (e.g., the value of foregone activities) is:

an application of the Cost-Benefit Principle

During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why?

answer B) The opportunity cost of attending college is lower when unemployment is high.

Every time you go to the grocery store, you try to wait in the shortest line. But the lines always seem to be roughly the same length. Why?

answer b) Other people are trying to choose the shortest line too.

Amy is thinking about going to the movies tonight. A movie ticket costs S15, and she'll hove 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.

answer $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 some one to cover a shift on Saturday at the same time as the concert. You could have to work 4 hours and she would pay you $11/hour. What is the opportunity cost of going to the concert?

answer A) S1 B) $9 C) $35 D) $36

Which of the following is most consistent with economizing behavior?

answer B) Even if you know how to paint, hiring someone to do the job is consistent wit economizing behavior, if our opportunity cost is high enough.

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 100 meals, your marginal cost of the 100th meal is:

answer D) $0

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 airfare is $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 could 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 airfare is $450. What is the opportunity cost of using the coupon j for the Miami trip?

answer S450

Larry was accepted at three different graduate schools, and must choose one. Elite U costs S60,000 per yer and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College at $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending state college at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry maximizes his economic surplus by attending:

answer State College

Suppose there are two parallel highways between two cities with approximately equal traffic. What would you expect to happen if the state began charging tolls to drive on one of those highways?

answer answer A) More drivers would drive on the non-toll road, making the toll road less congested.

What is the marginal benefit to Frank of the 2nd hour he spends picking in the east orchard?

answer b) 24

Refer to the accompanying table below. The marginal cost of the 3rd unit of this activity is :

answer c) $20

A firm pays Pam $40 per hour to assemble personal computers. Each day, Pam can assemble 4 computers if she works 1 hour, 7 computers if she works 2 hours, 9 computers if she works 3 hours, and 10 computers if she works 4 hours. Pam cannot work more than 4 hours day. Each computer consists of a mother board, a hard drive, a case, a monitor, a keyboard, and a mouse. The total cost of these parts is $600 per computer. If the firm sells each computer for $625, then how many hours a day should the firm employ Pam to maximize its net benefit from her employment?

answer c) 3 hours

Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't him anything to visit. Is curly correct?

answer c) No, because curly could have used his frequent flyer miles to go somewhere else instead.

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at ta cost of $170, Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. Given that driving to campus to buy the concert ticket was rational for Matt, Matt should:

answer c) drive to campus to buy the books because the $5 he would save is more then he saved by driving to campus to buy the concert ticket.

Economists use abstract models because:

answer c) they are useful for describing general patterns of behavior.

If individuals are rational, they should choose actions that yield the:

answer D) largest economic surplus.

According to the Incentive Principle:

answer D) people tend to do more of something when its benefits are greater

Deciding how to make the best use of limited resources to satisfy virtually unlimited wants is known in economics as

answer Economizing behavior

The total labor cost with 4 employees is:

answer c) $38,000

Refer to the accompanying table below. The marginal cost of the 4th unit of activity is :

answer c) $8

The net benefit of hiring fundraisers is largest when _________ employees are hired.

answer c) 2

The marginal cost of an activity is the:

answer a) change in the total cost of the activity that results form carrying out an additional unit of the activity.

The total benefit of a 3.0GHz computer is:

c) $1,700

An implication of scarcity is that:

people must make trade-offs