ECON 212 Exam 1 pt. 1

Consider Noah's decision to go to college. If he goes to college, he will spend $80,000 on tuition, $15,000 on room and board, and $4,000 on books. If he does not go to college, he will earn $22,000 working in a store and he will spend $13,000 on room and board. Noah's cost of going to college is

$108,000

Deshawn has spent $600 purchasing and repairing an old fishing boat, which he expects to sell for $900 once the repairs are complete. Deshawn discovers that, in addition to the $600 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $900 to potential buyers. He could sell the boat as it is now for $400. What should he do?

He should complete the repairs and sell the boat for $900.

Suppose the state of Wyoming passes a law that increases tax on cigarettes. As a result, the smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principals does this best demonstrate?

People respond to incentives.

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

The amount you value for the first movie + the $3.

After much consideration, you have chosen Cancun over Ft. Lauderdale as your spring break destination this year. However, spring break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?

The marginal cost of going to Ft. Lauderdale decreases.

Which of the following can policy do?

alter incentives, alter trade-offs, change opportunity costs.

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world increase her income by 25%, but she has decided to continue working as a professor. Her decision would not change unless the marginal

cost of teaching increased.

People are likely to respond to a policy change

if the policy changes either the cost or benefits of their behavior.

Economist are particularly adept at understanding that people respond to

incentives.

The principle that people face trade-offs applies to

individuals, families, societies.

A society allocates its scarce resources to various jobs. These scarce resources include

land, people, machines.

A rational decision maker takes action only if the

marginal benefit is greater than the marginal cost.

Billie Jean has $120 to spend and wants to buy either a new amplifier for her guitar or a new mp3 player to listen to music while working out. Both the amplifier and mp3 cost $120, so she can only buy one. This illustrates

people face trade-offs.

The adage, "There is no such thing as a free lunch," is used to illustrate the principal that

people face trade-offs.

The invisible hand works to promote general well-being in the economy primarily though

people's pursuit of self-interest.

What term refers to a property that society has limited resources and therefore cannot produce all the goods and services people wish to have?

scarcity.

A marginal change is a

small, incremental adjustment.

A rational decision maker

takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing

the benefits from eating one more bowl of ice cream to how much more one more bowl of ice cream costs.

Melody decides to spend three hours working overtime rather than going to the park with her friends. She earns $20 per hour for overtime work. Her opportunity cost of working is

the enjoyment she would have received had she gone to the park.

When computing the opportunity cost of attending a basketball game, you should include

the price you pay for the ticket and the value of your time.

For most students, the largest single cost of a collage education is

the wages given up to attend a school.

Economics is the study of how society manages its

unlimited wants and limited resources.

In economics, the cost of something is

what you give up to get it.

The opportunity cost of an item is

what you give up to get that item.