Section 1.1: Why Study Economics? (Ver. 2)

If your tuition is $5,000 this semester, your books cost $600, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $3000 this semester, then your opportunity cost of attending college this semester is A) $5,600 B) $5,900 C) $10,100 D) $11,600

$10,100

You have decided that you want to attend a costume party as Ironman. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will cost you $25 more. The marginal cost of completing the costume is A) $15 B) $25 C) $40 D) $65

$25

If your tuition is $25,000 this semester, your books cost $1,500, you can only work 20 rather than 40 hours per week during the 15 weeks you are taking classes and you make $15 per hour, and your room and board is $7,500 this semester, then your opportunity cost of attending college this semester is A) $26,500 B) $26,800 C) $31,000 D) $38,500

$31,000

If you can buy 9 DVDs for $126 or you could buy 10 DVDs for $130, then the marginal cost of the tenth DVD is: A) $4 B) $13 C) $14 D) $130

$4

Related to the Economics in Practice on p. 6: Which one of the following best supports the argument that most of the value of Apple's iPod is in its conception and design? A) Apple's history of innovative product design includes the earliest use of a Graphic User Interface (GUI) in the home computer market. B) The iPod would not have been as successful without the development of Web sites that allow users to purchase and download music. C) Companies that assemble the iPod and those that manufacture iPod components together capture only a small fraction of the iPod's retail value. D) Increases in the costs of components will reduce the profitability of the iPod, although price increases can be passed on to consumers.

Companies that assemble the iPod and those that manufacture iPod components together capture only a small fraction of the iPod's retail value.

True/False Marginal costs are those that can not be recaptured.

False

True/False Resources are unlimited in a wealthy society.

False

Which of the following statements is NOT correct? A) Economics is a behavioral science. B) In large measure, economics is the study of how people make choices. C) If poverty was eliminated there would be no reason to study economics. D) Economic analysis can be used to explain how both individuals and societies make decisions.

If poverty was eliminated there would be no reason to study economics.

The rise of the modern factory system in England during the late eighteenth and early nineteenth centuries is known as the A) Great Migration B) Industrial Revolution C) Wealth of Nations D) Dark Ages

Industrial Revolution

Suppose that you purchased a ticket to a jazz festival for $100 a month ago. Last week someone invited you to a hockey game on the same night as the jazz festival. You would much rather go to the hockey game than the jazz festival. You have tried unsuccessfully to sell the jazz festival ticket. Which of the following statements regarding this situation is correct? A) The $100 you paid for the jazz festival ticket is relevant to the decision, as this represents the opportunity cost of attending the hockey game. B) You should base your decision on whether or not the hockey game will provide you with more than $100 in satisfaction. C) The $100 you paid for the jazz festival ticket should be irrelevant in your decision making, because it is a sunk cost. D) The $100 jazz festival ticket should be irrelevant in your decision making, because it represents the marginal cost of attending the hockey game.

The $100 you paid for the jazz festival ticket should be irrelevant in your decision making, because it is a sunk cost.

Related to the Economics in Practice on p. 6: Which one of the following best explains why Apple's iPod is neither a pure import nor a pure export? A) The iPod has earned a large share of the market for portable music players in both the United States and other industrialized nations. B) Intellectual property laws protect the iPod in both domestic and international markets, although enforcement of those laws varies widely between countries. C) Apple stock is publicly traded, and so citizens of any country can own Apple stock. D) The iPod was designed and is sold by a U.S. company, but it is assembled in China from parts made in the United States and other countries.

The iPod was designed and is sold by a U.S. company, but it is assembled in China from parts made in the United States and other countries.

True/False Opportunity costs arise due to scarce resources.

True

True/False Sunk costs do not affect marginal decision making.

True

True/False The value of the best alternative foregone is the opportunity cost of making a decision.

True

Among the fundamental concepts in economics are A) opportunity cost B) marginalism C) efficient markets D) all of the above

all of the above

A market in which profit opportunities are eliminated almost instantaneously is A) a laissez-faire market B) a capitalist market C) a socialist market D) an efficient market

an efficient market

The concept of opportunity cost A) is relevant only to economics B) can be applied to the analysis of any decision-making process C) applies to consumers but not to firms D) refers only to actual payments and incomes

can be applied to the analysis of any decision-making process

Sunk costs are A) costs that cannot be avoided, because they have already been incurred B) the costs of what we give up when we make a choice or a decision C) the additional costs of producing an additional unit of a product D) the additional costs of consuming an additional unit of a product

costs that cannot be avoided, because they have already been incurred

An efficient market is a market A) in which everyone always gets what they want B) in which profit opportunities are eliminated almost instantaneously C) in which profits are always very high and persistent D) in which opportunity costs are zero

in which profit opportunities are eliminated almost instantaneously

The study of economics A) is a very narrow endeavor B) is a way of analyzing decision-making processes caused by scarcity C) is concerned with proving that capitalism is better than socialism D) focuses on how a business should function

is a way of analyzing decision-making processes caused by scarcity

You own the Star Wars six DVD set. The opportunity cost of watching these DVDs for the second time A) is zero B) is one-half the cost of the DVDs, as this is the second time you have watched it C) is the value of the alternative use of the time you spend watching the DVDs D) cannot be calculated

is the value of the alternative use of the time you spend watching the DVDs

If information is less costly and more easily available, then usually this A) makes markets more efficient B) makes markets less efficient C) increases profit opportunities D) increases the opportunity cost of acquiring more information

makes markets more efficient

That which we forgo, or give up, when we make a choice or decision is called A) sunk cost B) marginal cost C) real cost D) opportunity cost

opportunity cost

The reason that opportunity costs arise is that A) an economy relies on money to facilitate exchange of goods and services B) resources are scarce C) there are no alternative decisions that could be made D) people have limited wants

resources are scarce

Costs that cannot be avoided, regardless of what is done in the future, because they have already been incurred are A) total costs B) sunk costs C) marginal costs D) allocative costs.

sunk costs

Opportunity cost is A) that which we forgo, or give up, when we make a choice or a decision B) a cost that cannot be avoided, regardless of what is done in the future C) the additional cost of producing an additional unit of output D) the additional cost of buying an additional unit of a product

that which we forgo, or give up, when we make a choice or a decision

Which of the following is NOT an opportunity cost of attending college? A) the tuition you pay B) the income you could have earned if you didnʹt attend college C) the alternative uses of the time you spend studying D) the cost of the food that you consume while you are attending college

the cost of the food that you consume while you are attending college

Which of the following is the best definition of economics? A) the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided B) the study of how consumers spend their income C) the study of how business firms decide what inputs to hire and what outputs to produce D) the study of how the federal government allocates tax dollars

the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided

If you own a building and you decide to use that building to open a book store, A) there is no opportunity cost of using this building for a book store because you own it B) there is an opportunity cost of using this building for a book store because it could have been used in other ways C) there are no sunk costs involved in this decision D) the only cost relevant to this decision is the price you paid for the building

there is an opportunity cost of using this building for a book store because it could have been used in other ways

Which of the following is NOT listed in the book as a reason to study economics? A) to learn a way of thinking B) to understand society and global affairs C) to be an informed voter D) to learn how to make lots of money

to learn how to make lots of money

If you eat at a sushi restaurant that charges $20 for its all you can eat sushi special, then the marginal cost of your 10th piece of sushi is A) zero B) $2 C) $200 D) $2,000

zero