choice in a world of scarcity (module 2)
Danielle is planning a cruise to Mexico and has a budget for new clothes of $300. The average price for a pair of shoes is $50 while the average price for a suit is $100. Danielle already has 4 pairs of shoes purchased for her cruise, what is the opportunity cost of buying two more pairs of shoes?
1 dress
Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is
2 watches.
Which of the following statements reflects marginal decision-making
Booking this condo in a better location is worth the extra $100.
Which of the following statements is normative
Congress gives too many tax breaks to corporations.
Based on the graph of Maren's budget constraint for dresses and shoes, what accurately describes the slope of her budget constraint?
It is negative because of scarcity and the limited amount of money available to Maren.
The additional benefit that one more unit of something will provide is known as
Marginal benefit.
>Which is a true statement about marginal cost?
Marginal cost is the difference (or change) in cost of a different choice.
Which of the following statements is positive
Social security benefits are not taxed.
It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?
The boat rental was worth the additional fish caught, regardless of how little fish we left behind.
Identify the normative statement(s) among the following statement(s
The federal government spends too much.
A restaurant chain sponsors a charity that provides support to the parents of children being treated for cancer. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?
The money spent is worth the boost it gives to corporate image.
A local bank sponsors a charity run that raises funds for a non-profit building wells and schools in Mali, Africa. How would the use of the bank's funds for this fundraiser be justified when its goal is to maximize profit
The money spent is worth the public relations boost it gives to the bank's image.
Juan has a monthly budget of $100 to spend on entertainment. A concert ticket costs $20 while a movie ticket costs $10. This month Juan has attended one concert and 5 movies so far. If Juan decides to only go to movies for the rest of the month. How many movie tickets can he afford to purchase and stay within his budget
Three tickets.
Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Canada, Costa Rica has
a comparative advantage with coffee.
Dawnell is a skilled dancer. She is currently teaching modern dance full time for three high schools and makes $44,000 a year. She is now giving up her work and joining a touring dance company for the next two years. She will make $24,000 a year dancing, but gain much more in experience and connections. Dawnell's decision will result in
a two year opportunity cost of $40,000 after leaving her teaching position.
The house that Jamalla inherited from her mother can rent for $2000/month, but Jamalla decides to allow her brother to stay there for only half of that. This decision carried with it
a zero monetary cost but a $1000 per month opportunity cost.
A combination of clothing and cell phones that would meet the allocative efficiency would be
any combination on the production possibilities frontier that brings the highest level of satisfaction to the people in the economy.
A positive statement is
can be shown to be correct or incorrect.
Self-interest is not necessarily selfish, some say. In fact, self-interest likely includes an individual's consideration for
close friends and family.
Making an economically rational decision requires
considering the prospective benefits and costs to oneself.
The slope of a budget constraint line is influenced by
how much one product costs compared to the other.
The theory of rational behavior
is an assumption that economists make to have a useful model for how decisions are made.
To make an economically rational decision, marginal cost should be compared to
marginal benefit.
A budget constraint model differs from production possibilities model in that, typically
only the production possibilities model demonstrates diminishing returns.
<div>The production possibilities model illustrates an inverse relationship between two goods or services because
production of different types will compete for limited resources.
Khloe is the owner of a wellness center in Los Angeles. Her business has been growing over three years and she is now considering expanding her business by adding a 'health cafe' in her center. Khloe is analyzing the estimated costs, projected potential revenue and costs and benefits of a cafe. Khloe is behaving rationally because
she is considering cost and benefits and her decision will be based on her self interest.
In order to satisfy as many wants as possible, it is necessary to achieve allocative efficiency
since otherwise output may go to where it is less valued.
An Uber driver faces costs for driving that include sunk costs like insurance that contribute $.50 to the average cost per mile. Yet when a rider offers to pay less than $0.50 per mile for a ride, the driver agrees because
sunk costs like auto insurance (in this case) do not increase as driving increases.
Marcus is considering which college major to choose. In taking a rational approach, Marcus should consider
the benefit each major would bring and the cost of the degree.
Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles,
the greater the opportunity cost will be of satisfying consumer wants.
Because of ________ if a city government decides to spend money on beautifying its downtown and attracting tourism to its city when no money has been devoted to those efforts before, then gains in tourism may be significant
the law of diminishing returns
The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement
the marginal cost is greater than the marginal benefit of an additional encore.
A keynote speaker was known for his many speaking engagements, but now he has limited time and a rational mind. Even he would eventually start to turn down speaking engagement when, by his judgement
the marginal cost is greater than the marginal benefit of the next speaking engagement.
Scarcity is imposed on individual households in the form of income and
the prices of the goods that a person may purchase.
Hal and Gavin are siblings who own a mattress recycling company. Demand has been increasing for their services and the brothers are contemplating whether to open up an additional mattress drop off site in the downtown area. They estimate it would add $1 million in expenses with their profit increasing by $150 thousand each year for the next 5 years (all other things equal). Hal and Gavin decide
to not open a mattress drop off site downtown because the marginal costs proved to be too high.
Indi and Indrani are sisters who own a software development company. Demand has been increasing for their products and services and the sisters are contemplating whether to open up a satellite office in Austin. They estimate it would add $7 million in expenses and a profit of $12.5 million in total over the next 5 years (all other things equal). Indi and Indrani decide
to open a new office because the expected marginal benefit ($12.5 million over 5 years) is greater than the estimated marginal cost ($7 million).
Normative statements are based upon
value judgments.
