Ch. 1 assignment

Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal

benefit of leaving was greater than the marginal cost.

Causes of market failure include

externalities and market power

The principle that "people face tradeoffs" applies to

families, societies, and individuals

If an externality is present in a market, economic efficiency may be enhanced by

government intervention

Economics is the study of

how society manages its scarce resources.

The word "economy" comes from the Greek word oikonomos, which means?

"one who manages a household."

When the United States trades with Singapore,

both countries are likely made better off

Teresa eats three oranges during a particular day. The marginal benefit she enjoys from eating the third orange

can be thought of as the total benefit Teresa enjoys by eating three oranges minus the total benefit she would have enjoyed by eating just the first two oranges.

The average cost per seat on the 50-passenger Floating-On-Air Bus company's trip from Kansas City to St. Louis, on which no refreshments are served, is $45. In advance of a particular trip, three seats remain unsold. The bus company could increase its profit only if it

charged any ticket price above $0 for the three remaining seats

Rational people make decisions at the margin by

comparing marginal costs and marginal benefits

The government has just passed a law requiring that all residents earn the same annual income regardless of work effort. This law is likely to

decrease efficiency but increase equality

Economists use the word equality to describe a situation in which

each member of society has the same income.

U.S. laws requiring that drivers wear seat belts have resulted in

little change in the number of driver deaths, but more accidents and more pedestrian deaths.

The decisions of firms and households are guided by prices and self-interest in a

market economy

The term used to describe a situation in which markets do not allocate resources efficiently is

market failure

Sophia is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that

people face tradeoffs.

An example of an externality is the impact of

pollution from a factory on the health of people in the vicinity of the factory

Market power refers to the

power of a single person or small group to influence market prices

The overriding reason as to why households and societies face many decisions is that...

resources are scarce.

Efficiency means that

society is getting the maximum benefits from its scarce resources

Suppose after graduating from college you get a job working at a bank earning $30,000 per year. After two years of working at the bank earning the same salary, you have an opportunity to enroll in a one-year graduate program that would require you to quit your job at the bank. Which of the following should not be included in a calculation of your opportunity cost?

the $45,000 salary that you will be able to earn after having completed your graduate program

Mallory decides to spend three hours working overtime rather than watching a video with her friends. She earns $8 an hour. Her opportunity cost of working is

the enjoyment she would have received had she watched the video.

Which of the following is not generally regarded by economists as a legitimate reason for the government to intervene in a market?

to protect an industry from foreign competition

High-school athletes who skip college to become professional athletes

understand that the opportunity cost of attending college is very high.

The opportunity cost of an item is

what you give up to get that item