Quiz 2 - World of Scarcity

Denasia is planning a cruise to the Bahamas and has a budget for new evening wear of $400. The average price for a pair of shoes is $50 while the average price for an evening dress is $100. If Denasia already has 3 dresses purchased for her cruise, what is the opportunity cost of buying one more dress? 1) 1 pair of shoes 2) 2 dresses 3) 2 pairs of shoes

2 pairs of shoes

Identify the positive statement among the following statements. 1) College tuition is higher for out-of-state students than it is for in-state students. 2) College tuition is too high. 3) College tuition is not high enough.

College tuition is higher for out-of-state students than it is for in-state students.

Which of the following statements is normative? 1) Installing solar panels is better for society. 2) Installing solar panels will provide a rate of return on investment of 5%. 3) Investing in solar-powered electricity is a growing trend.

Installing solar panels is better for society.

Which of the following statements is normative? 1) Retired professionals spend less than working professionals. 2) Retired professionals are more generous tippers than working professionals. 3) Retired professionals should work less and get out more.

Retired professionals should work less and get out more.

Julie's entertainment budget for the next six months is $150 per month. She enjoys watching the latest movies and loves the ballet. A movie ticket costs $15 while a ballet ticket costs $35. This month Julie already attended one ballet show and three movies. If Julie decides she would rather see ballet shows for the remainder of this month, how many ballet shows can she attend and stay within her budget? 1) Four ballet shows. 2) Two ballet shows. 3) Three ballet shows.

Two ballet shows.

Two countries are trying to decide which product should have an increased production. Both Canada and Costa Rica produce coffee and corn, but it is easier for Canada to raise corn than grow coffee. Costa Rica easily grows coffee, but has a more difficult time growing corn. In comparison with Costa Rica, Canada has 1) a comparative advantage with corn. 2) the opportunity to increase their coffee production to better compete with Costa Rica. 3) the climate to create richer tasting coffee than Costa Rica.

a comparative advantage with corn.

In order to satisfy as many wants as possible, it is necessary to achieve productive efficiency 1) because otherwise output may go to where it is less valued. 2) because producing more of one thing also leads to producing more of another. 3) because otherwise resources are idle.

because otherwise resources are idle.

Assuming there are only two types of outputs in a country: consumer goods and nuclear missiles. All else being constant, as the nation produces more missiles, 1) every additional missile will reduce consumer goods production by more and more. 2) the more likely it is to satisfy all consumer wants. 3) the opportunity cost of consumer wants being satisfied will diminish.

every additional missile will reduce consumer goods production by more and more.

A profit-maximizing decision must be made about whether to keep a bed & breakfast operating. Until the place sells, the mortgage of $3000/month must be paid, since it is a sunk cost. If the restaurant operates, costs rise by $4000 per month, but revenue will be only $6000 per month. Until the building can be sold,: 1) it is best to ignore sunk costs and keep the bed & breakfast operating. 2) it is best to shut down the bed & breakfast since it is taking a loss. 3) it is best to keep the bed & breakfast operating because it is profitable.

it is best to ignore sunk costs and keep the bed & breakfast operating.

The slope of a budget constraint line is influenced by 1) prices of the two goods competing to satisfy wants. 2) the size of the budget. 3) the tastes and preferences of the decision-maker.

prices of the two goods competing to satisfy wants.

If a city government spends a good deal of money on crime prevention and also on infrastructure maintenance, then spending even more money on crime prevention should result in 1) significant gains in crime prevention. 2) relatively small gains in crime prevention. 3) significant gains in infrastructure maintenance.

relatively small gains in crime prevention.

Marginal benefit is 1) the change in the total benefit that a company can receive by producing another unit of product. 2) the additional benefit that one more unit of something will provide. 3) the average benefit that each unit of something provides.

the additional benefit that one more unit of something will provide.

Marginal cost is 1) on average, what each unit of output costs to produce or obtain. 2) the only thing necessary to consider for making rational decisions. 3) the cost of obtaining or producing one more unit of something.

the cost of obtaining or producing one more unit of something.

The agricultural extension agent told the farmer that one more crop-dusting will likely add a ton of additional wheat to the harvest. The rational farmer then calculated the selling price of a ton of wheat, since he would decide to crop-dust again if and only if 1) the marginal benefit is greater than the marginal cost of an additional crop-dusting. 2) the total benefits from all crop-dustings is greater than the the total cost of all crop-dustings. 3) the additional crops grown from one more crop-dusting (the marginal product) is rising.

the marginal benefit is greater than the marginal cost of an additional crop-dusting.

Budget constraints impose scarcity. They are based upon: 1) how much utility one more unit of a good will provide. 2) the accessibility of the items purchased. 3) the prices of the items purchased.

the prices of the items purchased.

Willa and Westley are siblings who built a hair salon business from the ground up. They are now contemplating opening an additional salon location. The estimate to open an additional salon would mean adding $1 million in expenses with their profit increasing by $400,000 each year for the next 5 years (all other things equal). Willa and Westley decide 1) to open a second salon because the marginal cost of the new salon is low compared to other similar projects. 2) to not open a new salon because the marginal costs prove to be too high. 3) to take on the new salon because the expected marginal benefit ($2 million over 5 years) is greater than the estimated marginal cost ($1 million).

to take on the new salon because the expected marginal benefit ($2 million over 5 years) is greater than the estimated marginal cost ($1 million).

Making an economically rational decision requires 1) always considering the long-run. 2) weighing prospective benefits and costs to oneself. 3) considering the impact of one's decisions on society.

weighing prospective benefits and costs to oneself.