ECON 2000 Ch.1 (missing graphs)
Economic models claim to be: A. reasonable abstractions of how people make choices, highlighting the most important factors. B. exact replications of the decision-making process people use. C. interesting chalkboard exercises with little applicability to the real world. D. exceptionally accurate methods of predicting nearly all behavior of everyone.
A
If all the world's resources were to magically increase a hundredfold, then: A. the scarcity principle would still govern behavior. B. economics would no longer be relevant. C. the scarcity principle would disappear. D. tradeoffs would become unnecessary.
A
In deciding the number of guitars to buy for his shop before the Christmas season, Mark is making a(n) __________________ decision. A. microeconomic B. macroeconomic C. economic surplus D. marginal choice
A
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a 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. The benefit to Matt of buying his books at the bookstore is _____. A. $5 B. $9 C. $170 D. $175
A
Positive economic principles are those that: A. are always correct. B. are influenced by political ideology. C. predict how people should behave. D. predict how people will behave.
A
Studying how Pat allocates her time between teaching classes and assisting undergraduate students is an example of: A. microeconomics. B. macroeconomics. C. individual economics. D. economic naturalism.
A
Suppose a person makes a choice that seems inconsistent with the cost-benefit principle. Which of the following statements represents the most reasonable conclusion to draw? A. The person (explicitly or implicitly) over-estimated the benefits or under-estimated the costs or both. B. The cost-benefit principle is rarely true. C. The person does not grasp how decisions should be made. D. The person is simply irrational.
A
Suppose a retail store was offering 10% off all prices on all goods. The incentive to take advantage of the 10% savings is: A. unrelated to the list price of one good. B. inversely related to the list price of the good. C. directly related to the list price of the good. D. independent of the list price.
A
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? A. More drivers would drive on the non-toll road, making the toll road less congested. B. More drivers would drive on the toll road making the non-toll road less congested. C. Traffic would remain evenly divided between the two roads as drivers continuously sought the less-congested route. D. Traffic would decrease on both roads.
A
The average benefit of an activity is the: A. total benefit of the activity divided by the number of units. B. number of units divided by the total benefit of the activity. C. number of units times the total benefit of the activity. D. extra benefit for one additional unit of the activity.
A
The extra benefit that comes from an extra unit of activity is called the _________ of the activity. A. marginal benefit. B. marginal cost. C. average benefit. D. reservation benefit.
A
The impact of government policies on the building of new roads and highways would be studied in the field of: A. microeconomics. B. macroeconomics. C. government economics. D. marginal economics.
A
The marginal cost of an activity is the: A. change in the cost of the activity that results from an extra unit of the activity. B. same as the total cost of the activity. C. ratio of total cost to the level of the activity. D. change in the level of the activity divided by the change in the cost of the activity.
A
The scarcity principle applies to: A. all decisions. B. only market decisions, e.g., buying a car. C. only non-market decisions, e.g., watching a sunset. D. only the poor.
A
The scarcity principle tells us that __________, and the cost-benefit principle tells us __________. A. choices must be made; how to make the choices B. choices must be made; that the costs can never outweigh the benefits of the choices C. rare goods are expensive; that the costs should outweigh the benefits of the choices D. rare goods are expensive; that the costs can never outweigh the benefits of the choices
A
The study of individual choices and group behavior in individual markets defines: A. microeconomics. B. economics. C. the scarcity principle. D. macroeconomics.
A
Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, it is a good offer, but if he wants to buy something with a price of $500, it is not a good offer. This is an example of: A. inconsistent reasoning; saving $20 is saving $20. B. the proper application of the cost-benefit principle. C. rational choice because in the first case he saves 40% and in the second case he saves 4%. D. marginal cost equals marginal benefit thinking.
A
What is the opportunity cost of living in a house that you already own? A. Zero, because you already own it. B. That mostly depends on current mortgage rates. C. The rent you could receive if you rented the house out to someone else. D. The taxes you pay your local government.
A
You had to pay $600 (non-refundable) for your meal plan for Fall semester which gives you up to 150 meals. If you eat only 100 meals, your average cost for a meal equals: A. $6. B. $5. C. $4. D. $0.25.
A
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 airfares are $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 would be willing to pay for the trip is $1400. 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 airfares are $450. If you use the frequent-flyer coupon to fly to Atlanta, would you get any economic surplus by making the trip? A. No, there is a loss of $50. B. Yes, surplus of $350. C. Yes, surplus of $400. D. Yes, surplus of $100.
A
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40 per hour. The firm sells each computer for $620. How many hours should the firm employ Pam to maximize its benefit from her employment? A. 0 hour B. 1 hour C. 3 hours D. 4 hours
B
A study that deals with the salaries of university professors would be considered: A. macroeconomics B. microeconomics C. economic naturalism D. marginal benefit
B
At the very least, Joe Average and Bill Gates are both identically limited by: A. their wealth. B. the 24 hours that comprise a day. C. their knowledge. D. their influence.
B
Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is: A. not rational. B. an application of the cost-benefit principle. C. an application of the scarcity principle. D. the relevant opportunity cost.
B
During times of high unemployment, colleges often observe an increase in enrollment even if tuition remains unchanged. Why? A. Students do not know about the decision pitfalls and go to college even though the net benefit is negative. B. The opportunity cost of attending college is lower because students are less likely to have good full-time jobs. C. The opportunity cost of attending college is higher because good jobs are harder to find. D. The benefit of attending college is lower because college graduates are less likely to find jobs upon graduation.
B
Every time you go to the grocery store, you try to choose the shortest line. But all of the lines always seem to be the same length. Why? A. The store manager tells the cashiers to speed up or slow down to maintain equal line lengths. B. Everyone else is trying to choose the shortest line too. C. The cashiers all work at the same speed. D. Cashiers do not have an incentive to work faster.
B
If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because: A. the benefits will be overstated. B. the costs will be understated. C. the benefits will be understated. D. the costs will be overstated.
B
If the government wanted to use the incentive principle to discourage smoking, it could: A. publicize the health risks associated with second-hand smoke. B. increase taxes on cigarettes, effectively raising the price. C. subsidize hospitals treating lung disease. D. invest more money in health research.
B
If the total benefits of watching 1, 2, and 3 baseball games on TV are 100, 120, and 125 respectively, then the marginal benefits of watching 1, 2 and 3 baseball games on TV are: A. 100,120, and 125 respectively. B. 100, 20, and 5 respectively. C. 100, 609, and 41.67 respectively. D. 100, 240, and 375 respectively.
B
Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to _________ because the economic surplus is ________. A. mow the lawn; greater B. wash clothes; greater C. mow the law; smaller D. wash clothes; smaller
B
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $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 surplus by attending: A. Elite U, because $60,000 is greater than the benefit at the other schools. B. State College, because the difference between the benefit and cost is greatest there. C. NoName U, because Larry has a full scholarship there. D. Elite U, because the opportunity costs of attending Elite U are the lowest.
B
Last year interest rates fell. The field of economics that would be most concerned with this is: A. microeconomics. B. macroeconomics. C. economic naturalism. D. marginal economics.
B
Macroeconomics is distinguished from microeconomics by its concentration on: A. choices. B. the performance of national economies and ways to improve upon their performance. C. individual markets. D. the level of prices in specific markets.
B
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a 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. Assume the minimum that Matt would be willing to accept to drive to the university campus is equal to the amount he saved on the concert ticket. What would be the amount of his economic surplus if he bought his textbooks at the university bookstore rather than via the Internet? A. $5 B. $1 C. $50 D. $20
B
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a 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. The benefit to Matt was ____ from driving to campus to buy the concert ticket last week. A. $2 B. $4 C. $9 D. $16
B
Most of us make sensible decisions most of the time, because: A. we know the cost-benefit principle. B. subconsciously we are weighing costs and benefits. C. most people know about the scarcity principle. D. we conduct hypothetical mental auctions when we make decisions.
B
Normative economics is concerned with how people _____ make decisions while positive economics is concerned with how people _____ make decisions. A. in the real world; in models B. should; do C. in power; in ordinary life D. in ordinary life; in power
B
Relative to a person who earns minimum wage, a person who earns $30 per hour has: A. a lower opportunity cost of working longer hours. B. a higher opportunity cost of taking a day off. C. a lower opportunity cost of driving farther to work. D. the same opportunity cost of spending time on leisure activities.
B
Several years ago there were two systems for viewing movies at home: Sony's BetaMax machines and VCR machines that played VHS tapes. Despite the higher quality of BetaMax video, VHS became the dominant format. Once VHS tapes were the dominant format, BetaMax virtually disappeared from consumer markets. Why? A. Movie producers preferred VHS to BetaMax. B. Consumers gained more benefit by using the same system that others used, allowing them to share movies. C. Movie rental stores boycotted all Sony products. D. BetaMax technology was obsolete.
B
Some states have started giving tax credits to homeowners who install solar panels. This is an example of: A. A decision pitfall because homeowners will not properly account for the costs and benefits of installing solar panels. B. Using the incentive principle to encourage homeowners to switch to solar energy. C. Normative economics, because people should use clean sources of energy. D. Macroeconomic policy because it involves government tax policy.
B
The central concern of economics is: A. poverty. B. scarcity. C. wealth accumulation. D. overconsumption.
B
The extra cost that results from an extra unit of an activity is the: A. marginal benefit. B. marginal cost. C. reservation cost. D. same as the opportunity cost.
B
The incentive principle states that a person is more likely to do something if: A. the opportunity costs are high. B. the benefits from doing it increase. C. everyone else is doing the same thing. D. he is paid to do it.
B
The opportunity cost of an activity is the value of: A. an alternative forgone. B. the next-best alternative forgone. C. the least-best alternative forgone. D. the difference between the chosen activity and the next-best alternative forgone.
B
The seventh glass of soda that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is eating at the cafeteria). The cost-benefit principle predicts that Tim will: A. realize he has had too much soda to drink and go home. B. drink the seventh glass and continue until the marginal benefit of drinking another glass of soda is zero. C. volunteer to empty out the fountain. D. not drink the seventh glass.
B
The use of economic models, like the cost-benefit principle, means economists believe that: A. this is exactly how people choose between alternatives. B. this is a reasonable abstraction of how people choose between alternatives. C. those who explicitly make decisions this way are smarter. D. with enough education, all people will start to explicitly make decisions this way.
B
Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are: A. limited, resources are limited, and thus choices must be made. B. unlimited, resources are limited, and thus choices must be made. C. unlimited, resources are limited to some but not to others, and thus some people must make choices. D. unlimited, resources are limited, and thus government needs to do more.
B
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. Should you go to the concert instead of working Saturday? A. Yes, your benefit is more than your cost. B. No, your benefit is less than your cost. C. Yes, your benefit is equal to your cost. D. No, because there are no benefits in the concert.
B
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. Your economic surplus of going to work on Saturday is: A. $0 B. $1 C. $35 D. $36
B
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 airfares are $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 would be willing to pay for the trip is $1400. 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 airfares are $450. If you do not use the frequent-flyer coupon to fly, should you go to Miami? A. Yes, your benefit is more than your cost. B. No, your benefit is less than your cost. C. Yes, your benefit is equal to your cost. D. No, because there are no benefits in the trip.
B
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 airfares are $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 would be willing to pay for the trip is $1400. 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 airfares are $450. What is the opportunity cost of using the coupon for the Miami trip? A. $100 B. $450 C. $500 D. $550
B
Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6, which brought your cumulative GPA down. What must be true? A. Your marginal grades (last semester's grades) were higher than your overall GPA. B. Your marginal grades (last semester's grades) were lower than your overall GPA. C. If this semester's grades are the same as last semester's, your overall GPA will stay the same. D. If this semester's grades are the same as last semester's, you might lose your scholarship.
B
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40 per hour. What is the marginal cost of producing the computers Pam assembles during her 3rd hour of work? A. $1,200 B. $1,240 C. $2,400 D. $2,440
C
A rational person is one who: A. is reasonable. B. makes choices that are easily understood. C. possesses well-defined goals and seeks to achieve them. D. is highly cynical.
C
Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. As a result: A. attending State U. for four years is costless for Alex. B. Alex has no incentive to work hard while at State U. C. the cost of attending State U. is the amount of money Alex could have earned working for four years. D. the cost of attending State U. is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.
C
Amy is thinking about going to the movies tonight. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is: A. $7. B. $30. C. $37. D. $37 minus the benefit of seeing the movie.
C
An economic naturalist is described as someone who: A. uses economic arguments to protect forests and wetlands from development. B. has a natural talent for drawing graphs. C. applies economic insights to everyday life. D. studies the process of natural selection in a marginal cost and marginal benefit framework.
C
An editorial in the paper argues that students should only be allowed to attend school so long as the marginal cost of educating that student is less than the marginal benefit of that student's education. The writer's reasoning is an application of: A. positive economics. B. negative economics. C. normative economics. D. economic naturalism.
C
Barry owns a clothing store in the mall and has asked two economic consultants to develop models of consumer behavior that he can use to increase sales. Barry should choose the model that: A. does not include simplifying assumptions. B. is the most detailed and complex. C. assumes that consumers apply the cost-benefit principle. D. predicts that consumers will always prefer Barry's store to the competing stores.
C
By convention, there are two major divisions of economics, called: A. marginal benefit and marginal cost. B. reservation price and opportunity cost. C. microeconomics and macroeconomics. D. rational economics and irrational economics.
C
Catherine and Nancy both own homes with lawns of similar size. Catherine mows her own lawn while Nancy hires someone to mow hers. Assume both women are rational decision makers. Which is the best explanation of the different decisions they make? A. The opportunity cost of Nancy's time is higher than the cost to her of hiring someone to mow the lawn. B. Nancy can get her lawn mowed for less than Catherine. C. Nancy doesn't own a lawnmower. D. Nancy earns more than Catherine does.
C
Curly used his frequent flyer miles to fly to visit Moe. Curly told Moe that it didn't cost him anything to visit. Is Curly correct? A. Yes, because Curly's frequent flyer miles made the trip free. B. Yes, because Curly could stay at Moe's house for free. C. No, because Curly could have used his frequent flyer miles to go somewhere else, but chose to visit Moe. D. No, because Curly had to pay for earlier trips in order to earn the frequent flyer miles.
C
Dean decided to play golf rather than prepare for tomorrow's exam in economics. One can infer that: A. Dean has made an irrational choice. B. Dean is doing poorly in his economics class. C. the economic surplus from playing golf exceeded the surplus from studying. D. the cost of studying was less than the cost of golfing.
C
Economic models are intended to: A. apply to all examples equally well. B. eliminate differences in the way people behave. C. generalize about patterns in decision-making. D. distinguish economics students from everyone else.
C
Economic surplus is: A. the benefit gained by taking an action. B. the price paid to take an action. C. the difference between the benefit gained and the cost incurred of taking an action. D. the wage someone would have to earn in order to take an action.
C
Economics is best defined as the study of: A. prices and quantities. B. inflation and interest rates. C. how people make choices under the conditions of scarcity and the results of those choices. D. wages and incomes.
C
Economists use abstract models because: A. every economic situation is unique, so it is impossible to make generalizations. B. every economic situation is essentially the same, so specific details are unnecessary. C. they are useful for describing general patterns of behavior. D. computers have allowed economists to develop abstract models.
C
Forest is a mountain man living in complete isolation in Montana. He is completely self-sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer: A. the scarcity principle does not apply to Forest. B. Forest is not required to make choices. C. the scarcity principle still applies because more hunting means less fishing and farming. D. Forest is very satisfied.
C
Ginger bought a phone that came with a $10 rebate. Ginger should fill out and mail in the rebate form if: A. the opportunity cost of the time and trouble of sending in the rebate form is less than $10. B. the opportunity cost of the time and trouble of sending in the rebate form is more than $10. C. she would have bought the phone without the rebate, and so sending in the rebate form involves no opportunity cost. D. Ginger's surplus from purchasing the phone was less than $10.
C
If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105 respectively, then the total costs are of 1, 2 and 3 hours of talking on the phone are: A. $50, $150, and $315 respectively. B. $50, $41.67, and $115 respectively. C. $50, $125, and $230 respectively. D. $50, $175, and $405 respectively.
C
Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is: A. the $12 she spent on the umbrella, food and drinks. B. only $1 because she would have spent the money on food and drinks whether or not she went to the beach. C. the movie she missed seeing. D. the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks.
C
Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20. After the movie, she says to one of her friends that the movie was not worth it. Apparently: A. Jenna failed to apply the cost-benefit model to her decision. B. Jenna was not rational. C. Jenna overestimated the benefits of the movie. D. Jenna underestimated the benefits of the movie.
C
Jody has purchased a non-refundable $25 ticket to attend a Miley Cyrus concert on Friday evening. Subsequently, she is asked to go to dinner and dancing at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going on the date, she should: A. include only the entertainment value of the concert in the opportunity cost of going on the date. B. include the cost of the ticket plus the entertainment value of the concert in the opportunity cost of going on the date. C. include only the cost of concert ticket in the opportunity cost of going on the date. D. include neither the cost of the ticket nor the entertainment value of the concert in the opportunity cost of going on the date.
C
Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that: A. Josh prefers schoolwork to football games. B. writing the paper is easier than going to the game. C. Josh doesn't have enough time for writing the paper and going to the game. D. it's too expensive to go to the game.
C
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. No Name U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. The opportunity cost of attending Elite U is: A. $50,000 B. $10,000 C. $20,000 D. $15,000
C
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $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 has decided to go to Elite U. Assuming that all of the values described are correct, for Larry to decide on Elite U, he must have: A. calculated his surplus from each choice and picked the one with the highest surplus. B. underestimated the benefits of attending No Name. C. miscalculated the surplus of attending Elite U. D. determined the opportunity cost of each choice and picked the one with the lowest opportunity cost.
C
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $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. The opportunity cost of attending State College is: A. $30,000 B. $20,000 C. $15,000 D. $10,000
C
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a 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. According to the cost-benefit principle: A. it would not be rational for Matt to drive to campus to purchase the books because the $5 saving is only two percent of the cost of the books, and that is much less than the 25 percent he saved on the concert ticket. B. it would be rational for Matt to drive to campus to purchase the books because it costs less to buy the books there than via the Internet. C. it would be rational for Matt to drive to campus to purchase the books because the $5 saving is more than he saved by driving there to buy the concert ticket. D. it would not be rational for Matt to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save.
C
Microeconomics is distinguished from macroeconomics in that microeconomics focuses on: A. the performance of the national economy. B. the overall price level. C. choices made by individuals or groups in the context of individual markets. D. how to improve the performance of the national economy.
C
Moe has a big exam tomorrow. He considered studying this evening, but decided to go out with Curly instead. Since Moe always chooses rationally, it must be true that: A. the opportunity cost of studying tonight is less than the value Moe gets from spending time with Curly. B. the opportunity cost of studying tonight is equal to the value Moe gets from spending time with Curly minus the cost of earning a low grade on the exam. C. Moe gets more benefit from spending time with Curly than from studying. D. Moe gets less benefit from spending time with Curly than from studying.
C
Most people make some decisions based on intuition rather than calculation. This is: A. irrational, because intuition is often wrong. B. consistent with the economic model of decision-making, because calculating costs and benefits leads to decision-making pitfalls. C. consistent with the economic model because people intuitively compare the relative costs and benefits of the choices they face. D. inconsistent with the economic model, but rational because intuition takes into account non-financial considerations.
C
One thing that distinguishes normative principles from positive principles is that: A. normative principles are pessimistic and positive principles are optimistic. B. normative principles reflect the social norms of the community, and positive principles reflect universal truths. C. normative principles tell us how people should make economic decisions, and positive principles tell us how people actually do make decisions. D. normative principles tell us how people actually make economic decisions, and positive principles tell us how people should make decisions.
C
Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work? A. Pat should always take the bus because it costs $0.50 less. B. Pat should always drive because it saves half an hour. C. Pat should drive if saving a half hour is worth $0.50 or more. D. Pat should take the bus if a half hour of time is worth $0.50 or more.
C
Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school children. Childcare for their children costs $12,000 per year. Pat has decided to stay home and take care of the children. Pat must: A. value spending time with the children by more than $25,000. B. value spending time with the children by more than $12,000. C. value spending time with the children by more than $13,000. D. value spending time with the children as much as does Chris.
C
Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck, but she finds one for $12,000. Her __________ is __________. A. benefit; $12,000 B. cost; $15,000 C. economic surplus; $3,000 D. economic surplus; $12,000
C
Suppose the most you would be willing to pay for a plane ticket home is $250, but you buy one online for $175. The economic surplus of buying the online ticket is: A. $175. B. $250. C. $75. D. $0.
C
The incentive principle is an example of: A. an economic decision-making pitfall. B. over-estimating the benefits of an action. C. a positive economic principle. D. a normative economic principle.
C
The last time gas prices increased drastically, sales of large Sport Utility Vehicles (SUVs) fell. What economic reason would explain this decrease in sales? A. SUVs were a fad and were no longer popular. B. People who liked SUVs had already purchased one. C. Higher gas prices increased the cost of owning a SUV. D. The price of SUVs increased because it cost more to build them.
C
The marginal benefit of an activity is the: A. same as the total benefits of the activity. B. total benefit divided by the level of the activity. C. extra benefit associated with an extra unit of the activity. D. total benefit associated with an extra unit of the activity.
C
The number of US households with access to the Internet and those with broadband connections is growing rapidly. As an economic naturalist, one could predict that when a major purchase is being considered, families will: A. always buy online. B. never buy online. C. collect more information before making the purchase because the cost of finding and acquiring it is lower. D. collect more information before making the purchase because the benefit of information is now larger.
C
The range of topics or issues that fit within the definition of economics is: A. limited to market activities, e.g., buying soap. B. limited to individuals and firms. C. extremely wide, requiring only the ideas of choice and scarcity. D. very limited.
C
The scarcity principle indicates that: A. no matter how much one has, it is never enough. B. compared to 100 years ago, individuals have less time today. C. with limited resources, having more of "this" means having less of "that." D. because tradeoffs must be made, resources are therefore scarce.
C
When a person decides to pursue an activity as long as the extra benefits are at least equal to the extra costs, that person is: A. violating the cost-benefit principle. B. following the scarcity principle. C. following the cost-benefit principle. D. pursuing the activity too long.
C
Which branch of economics is most likely to study differences in countries' growth rates? A. microeconomics B. normative economics C. macroeconomics D. experimental economics
C
Which of the following questions would not be answered in macroeconomics? A. What caused the great depression? B. At what rate does the US economy typically grow? C. Did the sharp increase in gasoline prices alter SUV sales? D. How does government spending affect the economy?
C
With ATMs, it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The difference has arisen because: A. flexibility was not valued 100 years ago. B. it was impossible to provide 24-hour service 100 years ago. C. the cost of providing 24-hour service is much lower today. D. government forced banks to become more convenient.
C
You had to pay $600 (non-refundable) for your meal plan for the Fall semester, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal equals: A. $6. B. $5. C. $4. D. $0.25.
C
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. What is your opportunity cost, if you go to work on Saturday? A. $0 B. $9 C. $35 D. $36
C
You save $10 on gas every week since you live close to the bus stop. You have class five days a week. What is your average benefit per day for living close to the bus stop? A. $10 B. $5 C. $2 D. $1.43
C
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 airfares are $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 would be willing to pay for the trip is $1400. 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 airfares are $450. If the Chicago-Atlanta round-trip air fare is $350, should you go to Miami? A. No, there is a loss of $50. B. No, there is a loss of $100. C. Yes, there is economic surplus of $50. D. Yes, there is economic surplus of $400.
C
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40 per hour. The firm sells each computer for $640. How many hours should the firm employ Pam to maximize its benefit from her employment? A. 1 hour B. 2 hours C. 3 hours D. 4 hours
D
A firm employs Pam to assemble personal computers. Pam can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 8 computers in 3 hours, 10 computers in 4 hours, and 11 computers in 5 hours. Each computer consists of a motherboard that costs $200, a hard drive that costs $100, a case that costs $20, a monitor that costs $200, a keyboard that costs $60 and a mouse that costs $20. The cost of employing Pam is $40 per hour. What is the marginal cost of producing the computers Pam assembles during her 4th hour of work? A. $1,200 B. $1,240 C. $2,400 D. $2,440
D
According to the cost-benefit principle: A. the lowest cost activity usually gives the lowest benefit. B. a person should always choose the activity with the lowest cost. C. a person should always choose the activity with the greatest benefit. D. the extra costs and benefits of an activity are more important considerations than the total costs and benefits.
D
According to the incentive principle: A. it is irrational to perform volunteer services. B. people will always take the highest-paying job. C. benefits are more important than costs in making a decision. D. people tend to do more of something when the benefits are greater.
D
Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is: A. not an economic problem because neither one costs money. B. not an economic problem because it's an hour that is wasted no matter what Chris does. C. an economic problem because the tuition Chris pays covers both the gym and the library. D. an economic problem because Chris has only one hour during which he can study or work out.
D
Dividing the total cost of n units of an activity by n reveals the: A. average benefit. B. marginal cost. C. units per cost. D. average cost.
D
Economic questions always deal with: A. financial matters. B. political matters. C. insufficient resources. D. choice in the face of limited resources.
D
If Jane works for 6 hours she can rent 12 apartments, and if she works for 7 hours she can rent 15 apartments. The marginal benefit of the 7th hour of Jane's work equals: A. 12 apartments. B. 15 apartments. C. 1 apartment. D. 3 apartments.
D
In general, rational decision making requires one to choose the actions that yield the: A. largest total benefits. B. smallest total costs. C. smallest net benefits. D. largest economic surpluses.
D
Jack has a ticket to see Bo Bice 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. The cost to Jack of seeing Bo Bice is: A. $30. B. $40. C. $70. D. $70 plus his forgone earnings.
D
Positive economic principles are those that: A. are always correct. B. are influenced by political ideology. C. predict how people should behave. D. predict how people will behave.
D
Sally earned $25,000 per year before she became a mother. After she became a mother, she told her employer that her opportunity cost of working is now $50,000, and so she is not willing to work for anything less. Her decision is based on: A. the high cost of raising a child. B. her desire to save for her child's college expenses. C. her increased value to her employer. D. the value she places on spending time with her child.
D
The Governor of your state has cut the budget for the University and increased spending on Medicaid. This is an example of: A. the pitfalls of considering average costs instead of marginal costs. B. poor normative economic decision making. C. poor positive economic decision making. D. choice in the face of limited resources.
D
The cost-benefit model used by economists is: A. unrealistic because it is too detailed and specific to apply to a variety of situations. B. unrealistic because everyone can think of times when he or she violated the principle. C. useful because everyone follows it all of the time. D. useful because most people follow it most of the time.
D
The cost-benefit principle indicates that an action should be taken: A. if the total benefits exceed the total costs. B. if the average benefits exceed the average costs. C. if the net benefit (benefit minus cost) is zero. D. if the extra benefit is greater than or equal to the extra costs.
D
The logical implication of the scarcity principle is that: A. one will never be satisfied with what one has. B. as wealth increases, making choices becomes less necessary. C. as wealth decreases, making choices becomes less necessary. D. choices must be made.
D
The principle of scarcity applies to: A. the poor exclusively. B. all consumers. C. all firms. D. everyone—consumers, firms, governments, and nations.
D
Which of the following would not be analyzed in microeconomics? A. How to make the largest profit? B. Whether to study or watch TV tonight. C. How an early freeze in California will affect the price of fruit? D. Whether the federal budget should always be balanced.
D
You had to pay $600 (non-refundable) for your meal plan for Fall semester, which gives you up to 150 meals. If you eat only 100 meals, your marginal cost for the 100th meal is: A. $6 B. $4 C. $0.25 D. $0
D
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr. What is the opportunity cost of going to the concert? A. $1 B. $9 C. $35 D. $36
D