Micro Exam 1
Refer to Figure 2-3. It is not possible for this economy to produce at point A B C D
C
Which of the following statements about comparative advantage is not true? The principle of comparative advantage applies to countries as well as to individuals. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.
Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.
The opportunity cost of an item is the number of hours needed to earn money to buy the item. what you give up to get that item. usually less than the dollar value of the item. the dollar value of the item.
what you give up to get that item.
Which of the following is an example of a normative, as opposed to a positive, statement? Universal healthcare would be good for U.S. citizens. An increase in the cigarette tax would cause a decrease in the number of smokers. A decrease in the minimum wage would decrease unemployment. A law requiring the federal government to balance its budget would increase economic growth.
Universal healthcare would be good for U.S. citizens.
Dale is a guitar teacher and Terrence is a tile layer. If Dale teaches Terrence's daughter to play the guitar in exchange for Terrence tiling Dale's kitchen floor, only Dale is made better off by trade. only Terrence is made better off by trade. both Dale and Terrence are made better off by trade. neither Dale nor Terrence are made better off by trade.
both Dale and Terrence are made better off by trade.
For a self-sufficient producer, the production possibilities frontier is less than the consumption possibilities frontier. is greater than the consumption possibilities frontier. is the same as the consumption possibilities frontier. is always a straight line.
is the same as the consumption possibilities frontier.
Refer to Figure 2-3. This economy cannot currently produce 70 washers and 70 dryers because it is not using all of its resources. it is not using the most efficient production process. it does not have the resources and technology to produce that level of output. consumers don't want that many washers and dryers.
it does not have the resources and technology to produce that level of output.
The term used to describe a situation in which markets do not allocate resources efficiently is economic meltdown. market failure. equilibrium. the effect of the invisible hand.
market failure.
What term refers to the idea that society has limited resources and therefore cannot produce all the goods and services people wish to have? inefficiency inequality scarcity market failure
scarcity
Marcus says that he would smoke one pack of cigarettes each day regardless of the price. If he is telling the truth, Marcus's demand for cigarettes is perfectly inelastic. price elasticity of demand for cigarettes is infinite. income elasticity of demand for cigarettes is 0. demand for cigarettes is unit elastic.
demand for cigarettes is perfectly inelastic.
Suppose the price of a bag of frozen chicken nuggets decreases from $6.50 to $5.75 and, as a result, the quantity of bags demanded increases from 600 to 800. Using the midpoint method, the price elasticity of demand for frozen chicken nuggets in the given price range is 0.35 0.43 2.33 2.89
2.33
Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one pound of peanuts? 1/3 hour 3 hours 10 hours 1/10 hour
3 hours
Refer to Table 2-3. What is the opportunity cost of increasing the production of corn from 400 bushels to 800 bushels? 200 bushels of wheat 400 bushels of wheat 600 bushels of wheat 800 bushels of wheat
400 bushels of wheat
Refer to Figure 2-1. Morgan buys a refrigerator for his new home. To which of the arrows does this transaction directly contribute? A only A and B C only C and D
A and B
Mina 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 $60 she earns working. the $60 minus the enjoyment she would have received from going to the park. the enjoyment she would have received had she gone to the park. nothing, since she would have received less than $60 worth of enjoyment from going to the park.
the enjoyment she would have received had she gone to the park.
Suppose that you have received $300 as a birthday gift. You can spend it today or you can put the money in a bank account for a year and earn 5 percent interest. The opportunity cost of spending the money today, in terms of what you could have after one year, is $0. $15 $305. $315.
$315.
Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier? (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars) (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars) (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars) (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
(200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)
Skip's Sealcoating Service increased its total monthly revenue from $12,000 to $13,500 when it raised the price of driveway repairs from $600 to $750. The price elasticity of demand for Skip's Sealcoating Service is 0.11 0.47 1.12 2.11
0.47
Which of the following statements about trade is false? Trade increases competition. With trade, one country must win and one country must lose. Bulgaria can benefit, potentially, from trade with any other country. Trade allows people to buy a greater variety of goods and services at lower cost.
With trade, one country must win and one country must lose.
Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one pound of cashews? 10 hours 3 hours 1/10 hour 1/3 hour
1/10 hour
Which arrow represents the flow of goods and services? A B C D
B
Refer to Figure 2-5. Which of the following events would explain the shift of the production possibilities frontier from A to B? The economy's citizens developed an enhanced taste for books. The economy experienced a technological advance in the production of books. More capital became available in the economy. More labor became available in the economy.
The economy experienced a technological advance in the production of books.
A good will have a more inelastic demand, the greater the availability of close substitutes. broader the definition of the market. longer the period of time. more it is regarded as a luxury.
broader the definition of the market.
When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is 1.50, and an increase in price will result in an increase in total revenue for good A. 1.50, and an increase in price will result in a decrease in total revenue for good A. 0.67, and an increase in price will result in an increase in total revenue for good A. 0.67, and an increase in price will result in a decrease in total revenue for good A.
0.67, and an increase in price will result in an increase in total revenue for good A.
Refer to Table 2-3. Which of the following combinations of corn and wheat is not currently attainable but would be attainable if there was an improvement in overall production technology? 1,600 bushels of corn and 300 bushels of wheat 1,200 bushels of corn and 800 bushels of wheat 1,000 bushels of corn and 2,200 bushels of wheat 400 bushels of corn and 1,800 bushels of wheat
1,000 bushels of corn and 2,200 bushels of wheat
Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito? 3 hours 1/4 hour 1/3 hour 4 hours
1/3 hour
Refer to Figure 3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities frontier is based on how many hours of work? 400 hours 100 hours 40 hours 1600 hours
100 hours
Refer to Figure 3-2. If the production possibilities frontier shown is for two months of production, then which of the following combinations of peanuts and cashews could Brazil produce in two months? 5 pounds of peanuts and 150 pounds of cashews 3 pounds of peanuts and 150 pounds of cashews 7 pounds of peanuts and 135 pounds of cashews 2 pounds of peanuts and 240 pounds of cashews
3 pounds of peanuts and 150 pounds of cashews
Refer to Table 2-2. What is the opportunity cost to Footville of increasing the production of shoes from 400 to 600? 400 socks 300 socks 200 socks 100 socks
300 socks
Which of the following could be the price elasticity of demand for a good for which a decrease in price would increase total revenue? 0 0.4 1 4
4
Refer to Figure 3-3. Arturo's opportunity cost of one burrito is 4/3 tacos and Dina's opportunity cost of one burrito is 1/2 taco. 3/4 taco and Dina's opportunity cost of one burrito is 1/2 taco. 4/3 tacos and Dina's opportunity cost of one burrito is 2 tacos. 3/4 taco and Dina's opportunity cost of one burrito is 2 tacos.
4/3 tacos and Dina's opportunity cost of one burrito is 2 tacos.
Refer to Table 3-8. If the production possibilities frontier is a straight line, then which of the following could represent the number of coats produced when 12 blankets are produced? 300 200 400 500
400
Refer to Figure 3-4. If Alice produces only lemonade, she can produce 200 pitchers per day. 400 pitchers per day. 450 pitchers per day. 300 pitchers per day.
400 pitchers per day.
Refer to Figure 3-3. If Arturo and Dina each divides his/her time equally between the production of tacos and burritos, then total production is 400 tacos and 300 burritos. 400 tacos and 250 burritos. 800 tacos and 500 burritos. 200 tacos and 150 burritos.
400 tacos and 250 burritos.
Refer to Table 3-4. Assume that Zimbabwe and Portugal each has 180 machine minutes available. If each country divides its time equally between the production of toothbrushes and hairbrushes, then total production is 96 toothbrushes and 48 hairbrushes. 720 toothbrushes and 1440 hairbrushes. 48 toothbrushes and 24 hairbrushes. 24 toothbrushes and 12 hairbrushes.
48 toothbrushes and 24 hairbrushes.
Refer to Table 3-4. Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes? 30 toothbrushes and 3 hairbrushes 20 toothbrushes and 6 hairbrushes 10 toothbrushes and 9 hairbrushes 5 toothbrushes and 11 hairbrushes
5 toothbrushes and 11 hairbrushes
Refer to Table 3-8. If the production possibilities frontier is bowed outward, then which of the following could represent the number of coats produced when 12 blankets are produced? 200 400 300 500
500
Refer to Table 3-3. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is 120 coolers and 36 radios. 28 coolers and 50 radios. 30 coolers and 9 radios. 60 coolers and 18 radios.
60 coolers and 18 radios.
Refer to Figure 3-5. Suppose Peru decides to increase its production of emeralds by 2. What is the opportunity cost of this decision? 40 rubies 60 rubies 30 rubies 120 rubies
60 rubies
Refer to Figure 2-3. If this economy devotes all of its resources to the production of dryers, then it will produce 0 dryers and 100 washers. 60 dryers and 50 washers. 80 dryers and 0 washers. 80 dryers and 50 washers.
80 dryers and 0 washers.
Refer to Figure 3-3. If Arturo and Dina both spend all of their time producing tacos, then total production is 800 tacos and 0 burritos. 800 tacos and 500 burritos. 400 tacos and 250 burritos. 400 tacos and 0 burritos.
800 tacos and 0 burritos.
Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded? A 7.5 increase in the price of the good A 13.33 percent increase in the price of the good An increase in the price of the good from $7.50 to $10 An increase in the price of the good from $10 to $17.50
A 13.33 percent increase in the price of the good
Which of the following is an example of a capital input? A computer A share of stock An hour of a worker's time $50,000
A computer
For which of the following individuals would the opportunity cost of going to college be highest? A promising young mathematician who will command a high salary once she earns her college degree A student with average grades who has never held a job A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree A student who is the best player on his college basketball team, but who lacks the skills necessary to play professional basketball
A famous, highly paid actor who wants to take time away from show business to finish college and earn a degree
Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1? A is a luxury and B is a necessity. A is a good after an increase in income and B is that same good after a decrease in income. A has fewer substitutes than B. A is a good immediately after a price increase and B is that same good three years after the price increase.
A is a luxury and B is a necessity.
Refer to Figure 2-3. Efficient production is represented by which point(s)? A, B A, B, and D A, B, and C C
A, B
Refer to Figure 3-4. If point A represents Alice's production and point B represents Betty's production, Only Alice can benefit from specialization and trade. Alice produces 100 pitchers of lemonade and 200 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas. Alice produces 180 pitchers of lemonade and 180 pizzas while Betty produces 200 pitchers of lemonade and 100 pizzas. Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas.
Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas.
Refer to Figure 3-4. If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade? Alice produces more pizzas and Betty produces more lemonade. Alice produces more lemonade and Betty produces more pizzas. There are no circumstances under which both Alice and Betty can benefit from specialization and trade. Both Alice and Betty produce only pizzas.
Alice produces more lemonade and Betty produces more pizzas.
Refer to Figure 3-2. The fact that the line slopes downward reflects the fact that Brazil should specialize in producing cashews. for Brazil, it is more costly to produce peanuts than it is to produce cashews. Brazil faces a trade-off between producing peanuts and producing cashews. Brazil will produce more peanuts and fewer cashews as time goes by.
Brazil faces a trade-off between producing peanuts and producing cashews.
In a market economy, who makes the decisions that guide most economic activity? Firms only Households only Firms and households Government
Firms and households
Which of the following statements does not apply to a market economy? Firms decide whom to hire and what to produce. The "invisible hand" usually maximizes the income of society as a whole. Households decide which firms to work for and what to buy with their incomes. Government policies are the primary forces that guide the decisions of firms and households.
Government policies are the primary forces that guide the decisions of firms and households.
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations? There is no such thing as a free lunch. People buy more when prices are high than when prices are low. No matter how much people earn, they tend to spend more than they earn. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then Iowa has an absolute advantage in the production of corn. Iowa has a comparative advantage in the production of corn. Oklahoma should produce just enough corn to satisfy its own residents' demands. Iowa should import corn from Oklahoma.
Iowa has a comparative advantage in the production of corn.
Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks. Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats.
Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.
If Korea is capable of producing either shoes or soccer balls or some combination of the two, then it would be impossible for Korea to have an absolute advantage over another country in both products. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. Korea should specialize in the product in which it has an absolute advantage.
Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.
In the circular-flow diagram, which of the following is not a factor of production? Labor Land Capital Money
Money
If the price of natural gas rises, when is the price elasticity of demand likely to be the highest? Immediately after the price increase One month after the price increase Three months after the price increase One year after the price increase
One year after the price increase
Suppose the state of Wyoming passes a law that increases the tax on cigarettes. As a result, smokers who live in Wyoming start purchasing their cigarettes in surrounding states. Which of the following principles does this best illustrate? People respond to incentives. Rational people think at the margin. Trade can make everyone better off. Markets are usually a good way to organize economic activity.
People respond to incentives.
Which of the following is an example of a positive, as opposed to normative, statement? Decreasing inflation should be a top priority since inflation is more harmful to the economy than unemployment. Welfare payments should be increased because they lead to a better world for everyone. Prices rise when the government prints too much money. When public policies are evaluated, the benefits to the economy of improved equality should be considered more important than the costs of reduced efficiency.
Prices rise when the government prints too much money.
Senator Jackson argues that replacing the federal income tax with a national sales tax would increase the level of output. Senator Feldman objects that this policy would benefit the rich at the expense of the poor. Both senators' arguments are primarily about equality. Both senators' arguments are primarily about efficiency. Senator Jackson's argument is primarily about equality, while Senator Feldman's argument is primarily about efficiency. Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.
Senator Jackson's argument is primarily about efficiency, while Senator Feldman's argument is primarily about equality.
If Shawn can produce more donuts in one day than Sue can produce in one day, then Sue has a comparative advantage in the production of donuts. Shawn has a comparative advantage in the production of donuts. Shawn has an absolute advantage in the production of donuts. Sue has an absolute advantage in the production of donuts.
Shawn has an absolute advantage in the production of donuts.
Which of the following is not correct? The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. The gains from specialization and trade are based not on comparative advantage but on absolute advantage. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good.
The gains from specialization and trade are based not on comparative advantage but on absolute advantage.
Refer to Table 2-2. Which of the following statements is correct? The opportunity cost of an additional 200 shoes is constant at 200 socks. The opportunity cost of an additional 200 shoes is constant at 300 socks. Footville's production possibilities frontier is a straight, downward-sloping line. The opportunity cost of an additional 200 shoes increases as more shoes are produced.
The opportunity cost of an additional 200 shoes increases as more shoes are produced.
Suppose an economy produces two goods, food and machines. This economy always operates on its production possibilities frontier. Last year, it produced 1,000 units of food and 47 machines. This year it experienced a technological advance in its machine-making industry. As a result, this year the society wants to produce 1,050 units of food and 47 machines. Which of the following statements is correct? Because the technological advance occurred in the machine-making industry, it will not be possible to increase food production without reducing machine production below 47. Because the technological advance occurred in the machine-making industry, increases in output can only occur in the machine industry. In order to increase food production in these circumstances without reducing machine production, the economy must reduce inefficiencies. The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.
The technological advance reduced the amount of resources needed to produce 47 machines, so these resources could be used to produce more food.
Refer to Figure 2-3. Suppose this economy is producing at point D. Which of the following statements would best explain this situation? The economy has insufficient resources to produce at a more desirable point. The economy's available technology prevents it from producing at a more desirable point. There is widespread unemployment in the economy. The economy is experiencing economic growth.
There is widespread unemployment in the economy.
Suppose the cost of flying a 100-seat plane for an airline is $50,000 and there are 10 empty seats on a flight. The marginal cost of flying a passenger is $50. $500. $50,000. This cannot be determined from the information given.
This cannot be determined from the information given.
Which of the following do economists not generally regard as a legitimate reason for the government to intervene in a market? To promote efficiency To promote equality To enforce property rights To protect an industry from foreign competition
To protect an industry from foreign competition
Which of the following is likely to have the most price elastic demand? Clothing Blue Jeans Tommy Hilfiger Jeans Pants
Tommy Hilfiger Jeans
Which of the following is likely to have the most price inelastic demand? Mint-flavored toothpaste Toothpaste Colgate mint-flavored toothpaste A generic mint-flavored toothpaste
Toothpaste
Thousands of people develop lung cancer from second-hand exposure to cigarette smoke. This is an example of a market failure caused by an externality. a market failure caused by market power. a market failure caused by equality. There is no market failure in this case.
a market failure caused by an externality.
The gains from trade are a result of more efficient resource allocation than would be observed in the absence of trade. evident in the real world, but impossible to capture in economic models. based on the principle of absolute advantage. evident in economic models, but seldom observed in the real world.
a result of more efficient resource allocation than would be observed in the absence of trade.
Trade can make everybody better off because it increases cooperation among nations. allows people to specialize according to comparative advantage. reduces competition among domestic companies. requires some workers in an economy to be retrained.
allows people to specialize according to comparative advantage.
Ryan produces hair clips and earrings. Celia also produces hair clips and earrings, but Ryan is better at producing both goods. In this case, trade could benefit neither Celia nor Ryan. benefit Ryan, but not Celia. benefit both Celia and Ryan. benefit Celia, but not Ryan.
benefit both Celia and Ryan.
Refer to Table 2-3. Based on the values in the table, the production possibilities frontier is bowed outward indicating increasing opportunity costs. bowed outward indicating decreasing opportunity costs. a straight line indicating constant opportunity costs. bowed inward indicating increasing opportunity costs.
bowed outward indicating increasing opportunity costs.
The most obvious benefit of specialization and trade is that they allow us to work more hours per week than we otherwise would be able to work. consume more goods by forcing people in other countries to consume fewer goods. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. consume more goods than we otherwise would be able to consume.
consume more goods than we otherwise would be able to consume.
The property of society getting the most it can from its scarce resources is called efficiency. equality. externality. productivity.
efficiency.
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly elastic, and the demand curve will be horizontal. inelastic, and the demand curve will be horizontal. elastic, and the demand curve will be vertical. inelastic, and the demand curve will be vertical.
elastic, and the demand curve will be horizontal.
Refer to Figure 5-1. Between point A and point B on the graph, demand is perfectly elastic. inelastic. unit elastic. elastic, but not perfectly elastic.
elastic, but not perfectly elastic.
The terms equality and efficiency are similar in that they both refer to benefits to society. However, they are different in that equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources. equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits. equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits. equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
Refer to Figure 3-4. Both Alice and Betty face a constant trade-off between producing pitchers of lemonade and pizzas. would benefit from specializing in lemonade production. can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza production. would benefit from specializing in pizza production.
face a constant trade-off between producing pitchers of lemonade and pizzas.
Elasticity of demand is closely related to the slope of the demand curve. The more responsive buyers are to a change in price, the steeper the demand curve will be. flatter the demand curve will be. further to the right the demand curve will sit. closer to the vertical axis the demand curve will sit.
flatter the demand curve will be.
Economists make assumptions to mimic the methodologies employed by other scientists. minimize the number of experiments that yield no useful data. minimize the likelihood that some aspect of the problem at hand is being overlooked. focus their thinking on the essence of the problem at hand.
focus their thinking on the essence of the problem at hand.
In the circular-flow diagram, in the markets for goods and services, households and firms are both sellers. goods and services, households are buyers and firms are sellers. the factors of production, households are buyers and firms are sellers. the factors of production, households and firms are both buyers.
goods and services, households are buyers and firms are sellers.
Microeconomics is the study of how money affects the economy. how individual households and firms make decisions. how government affects the economy. how the economy as a whole works.
how individual households and firms make decisions.
Refer to Figure 2-3. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is 0 washers. 20 washers. 40 washers. impossible to calculate because the economy cannot move from point D to point C.
impossible to calculate because the economy cannot move from point D to point C.
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that Mexico has nothing to gain from importing United States pork. in order to consume beyond its PPF, the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico. in order to consume beyond its PPF, the United States should refrain altogether from producing pork and import all of what it requires from Mexico.
in order to consume beyond its PPF, the United States should produce more pork than what it requires and export some of it to Mexico.
Absolute advantage is found by comparing different producers' payments to land, labor, and capital. locational and logistical circumstances. input requirements per unit of output. opportunity costs.
input requirements per unit of output.
When recommending specific policies to undertake, economists make claims about how the world is. descriptive statements. normative statements. positive statements.
normative statements.
Chloe's college raises the cost of room and board per semester. This increase raises Chloe's opportunity cost of attending college even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost reduces Chloe's incentive to attend college. even if the amount she would have to pay for room and board if she didn't attend college rose by the same amount. An increase in opportunity cost increases Chloe's incentive to attend college. only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college. only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost increases Chloe's incentive to attend college.
only if the amount she would have to pay for room and board if she didn't attend college rose by less than the increase in the amount her college charges. An increase in opportunity cost reduces Chloe's incentive to attend college.
people face tradeoffsWhile pollution regulations yield the benefit of a cleaner environment and the improved health that comes with it, the regulations come at the cost of reducing the incomes of the regulated firms' owners, workers, and customers. This statement illustrates the principle that trade can make everyone better off. rational people think at the margin. people face tradeoffs people respond to incentives.
people face tradeoffs
A rational decisionmaker ignores marginal changes and focuses instead on "the big picture." ignores the likely effects of government policies when he or she makes choices. takes an action only if the marginal benefit of that action exceeds the marginal cost of that action. takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of the availability of close substitutes in determining the price elasticity of demand. a necessity versus a luxury in determining the price elasticity of demand. the definition of a market in determining the price elasticity of demand. the time horizon in determining the price elasticity of demand.
the availability of close substitutes in determining the price elasticity of demand.
You have driven 800 miles on a vacation and then you notice that you are only 15 miles from an attraction you hadn't known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not planned to visit, you should include both the cost of driving the first 800 miles and the next 15 miles. the cost of driving the first 800 miles, but not the cost of driving the next 15 miles. the cost of driving the next 15 miles, but not the cost of driving the first 800 miles. neither the cost of driving the first 800 miles nor the cost of driving the next 15 miles.
the cost of driving the next 15 miles, but not the cost of driving the first 800 miles.
Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result, the equilibrium quantity decreases, and the equilibrium price is unchanged. the equilibrium price increases, and the equilibrium quantity is unchanged. the equilibrium quantity and the equilibrium price both are unchanged. buyers' total expenditure on the good is unchanged.
the equilibrium quantity decreases, and the equilibrium price is unchanged.
People are willing to pay more for a diamond than for a bottle of water because the marginal cost of producing an extra diamond far exceeds the marginal cost of producing an extra bottle of water. the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water. producers of diamonds have a much greater ability to manipulate diamond prices than producers of water have to manipulate water prices. water prices are held artificially low by governments, since water is necessary for life.
the marginal benefit of an extra diamond far exceeds the marginal benefit of an extra bottle of water.
Refer to Figure 2-6. Consider the production possibilities frontier for an economy that produces only sofas and cars. When society moves from point A to point B, the opportunity cost is the same as when society moves from point B to point C. it is giving up cars to get sofas. the opportunity cost is increasing. it moves from an inefficient point to an efficient point.
the opportunity cost is the same as when society moves from point B to point C.
When computing the opportunity cost of attending a concert you should include the price you pay for the ticket and the value of your time. the price you pay for the ticket, but not the value of your time. the value of your time, but not the price you pay for the ticket. neither the price of the ticket nor the value of your time.
the price you pay for the ticket and the value of your time.
Refer to Figure 2-6. Consider the production possibilities frontier for an economy that produces only sofas and cars. The opportunity cost of each car is the slope of the production possibilities frontier, or 2/3 of a sofa. the reciprocal of the slope of the production possibilities frontier, or 3/2 sofas. the reciprocal of the slope of the production possibilities frontier, or 2/3 of a sofa. the slope of the production possibilities frontier, or 3/2 sofas.
the slope of the production possibilities frontier, or 3/2 sofas.
The marginal benefit Sabrina gets from purchasing a third pair of gloves is the same as the total benefit she gets from purchasing three pairs of gloves. more than the marginal cost of purchasing the third pair of gloves. the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves. the total benefit she gets from purchasing four pairs of gloves minus the total benefit she gets from purchasing three pairs of gloves.
the total benefit she gets from purchasing three pairs of gloves minus the total benefit she gets from purchasing two pairs of gloves.
Jerome says that he will spend exactly $25 each month on new apps for his mobile device, regardless of the price of apps. Jerome's demand for apps is perfectly elastic. unit elastic. perfectly inelastic. somewhat inelastic, but not perfectly inelastic.
unit elastic.