ECON Mod 3

Which of the following statements is most consistent with the rule of rational choice?

"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

Which of the following is true?

-An economy in which labor is relatively scarce would tend to use capital intensive production methods. - An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be.

The completely private ownership of property and the exclusive use of the market system to direct and coordinate economic activity are most characteristic of:

a market economy

An individual has a comparative advantage in production if that individual

can produce at the lowest opportunity cost.

Marginal thinking is best demonstrated by:

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

When a person possesses a comparative advantage in the production of one good or service, it:

permits gains from trade to be realized due to a more efficient use of resources.

Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would:

reduce the after-tax cost of raising children and therefore increase the birth rate

If a student enrolls in an additional course at the university, an economist would conclude that:

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

The opportunity cost of an action is equal to:

the highest valued opportunity that must be sacrificed in order to take the action

Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that:

-California has a comparative advantage in producing almonds. -the opportunity cost of producing honey is lower in Oregon than in California. -the opportunity cost of growing almonds is lower in California than in Oregon. -Oregon has a comparative advantage in producing honey. -All of the other answers are true.*

Which of the following is true?

-In the product markets, firms are buyers and households are sellers. -In the factor markets, firms are sellers and households are buyers. -Firms receive money payments from households for labor, land, capital, and entrepreneurship. -All of the above are true. -None of the above is true.*

A student has a chance to see Green Day in concert. The student also has a major economics exam in the morning. If the student goes to the concert

-the opportunity cost of the concert is the value of the time spent studying. -the decision involves a trade-off. -she may receive a lower grade on the economics exam.

Which of the following policies would be most effective in promoting monthly water conservation?

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25.

If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.

In a market economy how do we determine who will get the goods and services that have been produced?

Whoever can afford them

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

A downward sloping straight-line production possibilities curve implies:

a constant opportunity cost.

Marginal analysis involves:

comparing the additional benefit from an action to the additional cost

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:

equals $2.00

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

export; import

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that

in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage.

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:

increase the opportunity cost of going on the date