Econ Chapter 1&2

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:

$48,900

Only a very small portion of people who use microwaves know how they work. This is an example of:

Division of knowledge.

The reason why Martha Stewart does not iron her own clothes is that:

Her opportunity cost of ironing exceeds the person's wages providing the ironing service.

According to the theory of comparative advantage, a country should specialize in producing a good that involves

A lower opportunity cost than that of other countries.

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage?

Absolute advantage refers to the ability to produce a larger amount of goods with the same number of inputs, whereas comparative advantage refers to the ability to have the lowest opportunity cost of production.

Anita is a wonderful baker and can bake 10 cakes in a day, but then has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John can make equally delicious cakes and cookies but can only make seven cakes or 100 cookies in a day. Based on this information, which of the following statements is true?

Anita should bake cookies and John should bake cakes.

Economists think that people are self-interested:

Because they only respond to incentives in predictable ways.

In the 1800s, the federal government paid railroad companies for each mile of track built. This payment scheme created incentives for railroad companies to lay track:

Between points A and B using the most indirect route.

Monetary and Fiscal policies:

Can reduce the severity of economic busts.

Specialization and trade can ____ the per-unit cost of production because _____.

Decrease; it creates economies if scale associated with large-scale production.

Trade barriers like the Berlin Wall:

Decreased innovation and global cooperation.

The ______ has the power to regulate the money supply in the United States.

Federal Reserve

Booms and busts refer to the:

Fluctuations in economic activity over time.

Suppose France can produce four phones or three computers with one units of labor, and Sweden can produce one phone or two computers with one units of labor. If France can only trade with Sweden., then the theory of comparative advantage suggests that:

France should specialize in producing phones and import computers from Sweden.

When markets don't align self-interest with social interest:

Government may improve the situation by changing incentives.

Suppose the United States is more productive than China at making both T-shirts and cell phones. The theory of comparative advantage suggests that consumption in both countries will:

Increase if each country specializes in producing the good with a lower opportunity cost.

Adam Smith advocated the benefits of:

International trade.

The opportunity cost of committing a crime and spending 5 years in jail:

Is higher for people who are employed than for the unemployed

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?

Jesse should teach how to make friends and Addae should teach math.

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario,______ has a comparative advantage in decorating wedding cakes.

Jill; Jack

Mark values his drum set and $800 and Ella values her guitar at $1,000. Suppose that Mark trades his drum set for Ella's guitar.

Mark must value Ella's guitar for at least $800, and Ella must value Mark's drum set for at least $1,000.

According to Milton Friedman, "Inflation is always and everywhere a:

Monetary Phenomenon."

Among the most powerful institutions for supporting good incentives are

Property rights

Institutions that support economic growth are the ones that:

Provide incentives for entrepreneurs to take risks and innovate.

Which of the following best describes the principle of comparative advantage?

Someone has the ability to produce the same good for the lowest opportunity cost.

Globalization is

The advance of human cooperation across national boundaries.

Inflation is primarily caused by:

The government printing too much money.

Inflation can be defined as:

The increase in the general level of prices in an economy.

What is a plausible economic explanation as to why Braille "dots" are commonly found on drive-up automatic teller machines although blind customers likely will not use a drive-up automatic teller machine?

The marginal cost of making two different types of keypads is substantial, and the benefit of proving keypads without the Braille dots is a mere inconvenience to ATM users.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

The opportunity cost of painting a house is higher for Alex Rodriquez than for the high school student.

The historical rise in living standards of American workers is primarily a result of:

The rise in American productivity.

What is meant by the term "marginal revolution"?

The transformation in economic thought that occurred with the discovery of marginal thinking.

In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:

The value of studying economics.

The opportunity cost of a choice is:

The value of the opportunities lost.

Bill Gates dropped out of college and founded Microsoft. His opportunity cost of continuing to attend college was

Tuition, the cost of books, and the income Fromm his Microsoft pursuits.

The Zimbabwean government printed money as fast as it could for years. As a result:

Zimbabwe experience inflation at a rate of billions of percent per month.