Module 1

Ed is taking off from work for 4 hours this afternoon and going to a baseball game. The ticket to the game costs $20 and it costs $5 to park at the stadium. Ed earns $10 an hour at his job. Ed's opportunity cost of going to the ball game is

$65.→ Opportunity cost is everything you give up when you make a choice, the costs that you actually pay as well as income foregone.

True or False? The impact of a property tax break on firms' decisions to locate in a particular city is a macroeconomic issue.

False → The impact of a city giving property tax breaks to attract new businesses affects the economy of the local area, not the entire economy, so it is a microeconomics issue.

Katherine has a physics exam tomorrow. However, a free lecture by one of her favorite authors is taking place this evening. Katherine decides to attend the lecture instead of studying for her exam. Which is a correct statement?

Katherine's opportunity cost is the cost of getting to the lecture event itself plus the reduction in her physics exam grade by not studying tonight.

_________ focuses on how individuals and firms make economic decisions.

Microeconomics→ The study of the economy as a whole is the focus of macroeconomics; microeconomics focuses on the economic decisions individual people and firms.

In Colorado, there has been a drought, and rural communities are fighting with urban areas over water. This statement best represents this economic concept:

Resources are scarce.

Which of the following statements is a normative statement?

The unemployment rate is too high.

When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the $1 million improvement will not happen because "that money could be spent building 70 curb ramps." This statement best represents this economic concept:

The real cost of something is what you must give up to get it.

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

The real cost of something is what you must give up to get it.

True or False? The branch of economics that deals with how things should be is normative economics.

True → Positive economics describes how the economy works, while normative economics deals with how it should work.

If resources are "scarce," it means that they:

cannot provide enough goods or services to satisfy all human material wants and needs.

Which of the following are economic resources?

land, labor, physical capital, and human capital→ These are resources that can be used to produce other things.

Your elderly grandma tells you: "I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost." Your grandma does not understand the concept of:

opportunity cost in economics.

Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:

opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.

True or False? Macroeconomics focuses on economic aggregates that summarize data across many different markets. .

rue → Macroeconomics also looks at how government intervention might change the value of these aggregates..

Corner offices in high-rise office buildings usually cost more to rent than other offices. This best illustrates the economic principle of:

scarce resources.

Economics is the study of:

scarcity and choice.

How people choose among the alternatives available to them is:

the study of microeconomics.

Economists who are asked to choose between two different government policies may disagree because:

they base their conclusions on models that make different assumptions.

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is:

your enjoyment of the new CD player.