ECON 120 Chapter 2

The lowest amount a firm is legally allowed to pay an employee is known as the __________.

minimum wage

In the above graph, which of the following combinations is unattainable with the current resources available in this country?

Combination G

When is output lower than the efficient level?

When marginal benefit is greater than marginal cost

If your nominal wages increased by 10% and inflation was 15%, your real wage;

decreased

One of the first steps in deciding whether to complete your education is to:

evaluate the marginal cost and marginal benefit of that decision.

Social security payments are indexed to inflation so that recipients can;

maintain their purchasing power.

The previous table shows the marginal benefit that Ted earns from keeping his store open one more hour. Ted has a marginal cost of $90 per hour. How many hours should Ted stay open?

22 hours. Ted needs to stay open as long as his marginal benefit exceeds his marginal cost. Given Ted has a marginal cost of $90 per hour, he should stay open for 22 hours.

In the above graph, which of the following combinations of pies and cakes is unattainable given the existing resources?

Four cakes and seven pies

Refer to the previous graph. Which of the following best represents the situation in which BMW must face a trade-off between producing SUVs and producing hybrids?

Moving from point B to point C

According to the table of data, when do diminishing returns in the production of pizzas begin?

When the third worker is hired. According to the table of data, diminishing returns in the production of pizzas begin when the third worker is hired. The marginal product of labor goes from 250 when the second worker is hired to 100 when the third worker is hired. This decline illustrates the law of diminishing returns.

Decision analysis that involves comparing marginal costs and marginal benefits to determine the best course of action is known as:

marginal analysis.

The additional benefit resulting from a small increase in some activity is called the

marginal benefit

The optimal economic decision is to continue any activity, investing or otherwise, up to the point where:

marginal benefit equals marginal cost

Economic variables that are calculated in current year prices are referred to as __________ variables, while variables that have been corrected to account for the effects of inflation are __________ variables.

nominal, real

The principle of opportunity cost evolves from the concept of:

scarcity

The principle of diminishing returns applies

when at least one input is fixed.

When is output higher than the efficient level?

when marginal benefit is less than marginal cost

In your decision about how much output to produce two years from​ now, would you use the principle of diminishing​ returns?

​No, because in the long run all inputs are variable.

In your decision about how much output to produce this​ week, would you use the principle of diminishing​ returns?

​Yes, because in the short run some inputs are fixed.

According to the graph, which point represents an efficient use of resources? Quantity of Hybrids Produced per Day vs. Quantity of SUVs Produced per Day

Point C

Which of the following is NOT a possible opportunity cost of attending college?

The cost of housing

Marlene decided to close down her retail clothing store and go back to work for a large corporation, even though she was making an accounting profit. Her decision was based on the fact that she would make more money in her old job than she was making in the retail clothing store. Marlene's decision factored in:

The opportunity cost of lost wages from keeping her store open.

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

Which of the following is known as the highest-valued alternative that must be given up in order to engage in an activity?

Opportunity cost

The outward shift of the production possibilities frontier from point A to point B in the above graph would most likely be caused by:

a technological advance that affects both the production of automobiles and aircraft carriers