Thinking like an economist

Suppose you plan to buy a new pair of running shoes. To buy them online, the pair costs $9. However, the value you had placed on the buying the shoes online is $12. Based on this information, your economic surplus from buying the shoes online is _____. Multiple choice question. $3 $9 $6

$3

You are either going to spend the evening studying at the library (an activity you value at $18) or you are going to go out to dinner with your friends (where you will spend $16 on food). What is your opportunity cost of going out to dinner? Multiple choice question. $34 $18 $16

$34

Suppose you are considering whether to spend an additional hour studying for your economics midterm tomorrow. If you do not study you can either surf the web, which you value at $5, or you can talk to your roommate, which you value at $4. Your opportunity cost of studying for an additional hour is: Multiple choice question. $1 $9 $4 $5

$5

You are considering whether to take a few days off work to visit your best friend who lives in New York. You estimate that airfare plus other travel expenses will cost $575. In addition, you will have to use two vacation days, which you value at $100 each. Assuming there are no other costs associated with your trip, what is the opportunity cost of visiting your friend? Multiple choice question. $775 $200 $575

$775

The ______ Principle states that an action should be taken if, and only if, its benefits exceed its costs.

Cost-Benefit

A sunk cost is

a cost that is beyond recovery at the time a decision is made.

You're trying to decide whether to go for a run. If you don't go for a run, you'll either watch TV or do your homework. Your opportunity cost of going on a run is Multiple choice question. the sum of the value you place on watching TV and the value you place on doing homework, since you have to give up doing both. either the value you place on watching TV or the value you place on doing homework, whichever is larger. zero since watching TV and doing homework are free. either the value you place on watching TV or the value you place on doing homework, whichever is smaller.

either the value you place on watching TV or the value you place on doing homework, whichever is larger.

In economics, a(n) _____ individual is someone with well-defined goals who tries to fulfill those goals as best he or she can. Multiple choice question. rational successful intelligent wealthy

rational

A cost that is beyond recovery at the moment a decision is made is a(n) Multiple choice question. marginal cost. sunk cost. implicit cost.

sunk cost.

Which of the following costs should be ignored when weighing the costs and benefits of an action? Multiple choice question. variable costs sunk costs opportunity costs marginal costs

sunk costs

The economic surplus of an action is Multiple choice question. the benefit of taking an action. the additional resources that are expended when you take an action. the benefit of taking an action minus its cost.

the benefit of taking an action minus its cost.

The average cost of carrying out an activity is Multiple choice question. the increase in total cost that results from carrying out one additional unit of the activity. the total cost of undertaking n units of an activity divided by the time it takes to you to undertake those n units. the relevant cost to consider when deciding whether to undertake an activity. the total cost of undertaking n units of an activity divided by n.

the total cost of undertaking n units of an activity divided by n.

Opportunity cost is Multiple choice question. the value of what must be foregone in order to undertake an activity. a cost that is beyond recovery at the moment a decision must be made. a cost that cannot be perfectly measured. the total cost of undertaking n units of an activity divided by n.

the value of what must be foregone in order to undertake an activity.

You are considering whether to spend the evening watching TV or studying for your economics course. Your opportunity cost of watching TV is Multiple choice question. zero since studying is free. the value you place on studying for your economics course. zero since you can watch the TV show for free.

the value you place on studying for your economics course.

Suppose you need to buy a new cell phone charger. You can buy one at a nearby store for $10, or you can buy one online for $8.50, but it'll take 2 days to arrive. If the cost to you of waiting two days to get the charger is $1, then your economic surplus from buying the charger online instead of at the store is: Multiple choice question. $1 $10 50 cents $8.50

50 cents

An activity's benefit is the total benefit of carrying out n units of an activity divided by n. (Enter one word as your answer.)

Average

Suppose you pay $35 to reserve a camp site at a local state park. The rules specify that you can only receive a refund if you cancel your reservation 2 weeks before your trip. Several days before your trip, you learn that it's supposed to rain the whole time you had planned to camp, and you are having second thoughts about going. Should the $35 you paid for the camp site factor into your decision about whether to go camping? Multiple choice question. Yes No

No

Suppose you pay $75 to buy a ticket to see one of your favorite bands next month. When the day of the concert rolls around, should the cost of the ticket figure into your decision about whether to go to the concert (assume you have no way to sell your ticket to anyone else)? Multiple choice question. No Yes

No

Suppose you've decided to go out to eat with some friends. If you take the time to go online, you know you can download a $5 dollar off coupon for the restaurant. Should your decision about whether to download the coupon depend upon the amount you expect to pay for your meal? Multiple choice question. Yes No

No

When assessing the costs and benefits associated with taking an action, it is generally best to consider costs and benefits Multiple choice question. as absolute dollar amounts rather than proportions. as neither proportions nor absolute dollar amounts. as proportions rather than absolute dollar amounts.

as absolute dollar amounts rather than proportions.

The Cost-Benefit Principle states that an action should be taken if, and only if Multiple choice question. its benefits exceed its costs. there are no resource constraints. the cost of taking the action is close to zero.

its benefits exceed its costs.

In standard economic models, a rational person Multiple choice question. undertakes activities whenever the extra benefit of the activity is greater than zero. makes choices by weighing the extra benefits of an action against its extra costs. only considers the explicit costs of an action, without regard to its implicit costs. will take any action that is financially feasible.

makes choices by weighing the extra benefits of an action against its extra costs.

Suppose you're trying to decide whether to look for free street parking or pay $10 to park in a parking garage. You should Multiple choice question. park in the parking garage if you'd be willing to pay less than $10 to avoid the hassle of looking for parking. park in the parking garage if you'd be willing to pay at least $10 to avoid the hassle of finding street parking. find street parking because it's free.

park in the parking garage if you'd be willing to pay at least $10 to avoid the hassle of finding street parking.

Although we have boundless needs and wants, the resources available to us are limited. As a result, Multiple choice question. trade-offs are inevitable. there is no point in weighing the costs and benefits of our actions. we tend to make bad decisions.

trade-offs are inevitable.

_____ is study of how people make choices under conditions of scarcity and the implications of those choices for society. Multiple choice question. Economic naturalism Normative analysis Opportunism Economics

Economics

People sometimes apply the Cost-Benefit Principle incorrectly because they evaluate costs and benefits Multiple choice question. as absolute dollar amounts rather than proportions. as proportions rather than absolute dollar amounts.

as proportions rather than absolute dollar amounts.

In calculating opportunity cost, the textbook includes Multiple choice question. explicit costs but not implicit costs. neither implicit nor explicit costs. implicit costs but not explicit costs. both implicit and explicit costs.

both implicit and explicit costs.

The benefit of taking an action minus its cost is known as Multiple choice question. economic surplus. the cost-benefit ratio. opportunity cost. economic profit.

economic surplus.

When making decisions, people sometimes make mistakes because they Multiple choice question. ignore sunk costs. fail to consider implicit costs. do not have any implicit costs. take implicit costs into consideration.

fail to consider implicit costs.

One common decision pitfall is to Multiple choice question. consider the marginal cost and marginal benefit of taking an action. measure costs and benefits as proportions rather than absolute dollar amounts. take into consideration the implicit costs of taking an action.

measure costs and benefits as proportions rather than absolute dollar amounts.

Economists believe that people Multiple choice question. should want less out of life, both in terms of what they are able to do and what they are able to have. can do everything and have everything they want with sufficient planning and hard work. never have enough time, money, or energy to do everything or have everything they want.

never have enough time, money, or energy to do everything or have everything they want.

Suppose you plan to buy a new pair of cleats and a new pair of shin guards at your local sporting goods store. You have a 10% off coupon for the cleats and a 50% off coupon for the shin guards. If soccer cleats are $70 and shin guards are $10, and the store will only accept one coupon per customer, then what should you do? Multiple choice question. Use the 50% off coupon for the shin guards because it's a bigger percentage savings. Use the 10% off coupon for the cleats because it's a bigger dollar savings.

Use the 10% off coupon for the cleats because it's a bigger dollar savings.

You're trying to decide whether to go for a run. If you don't go for a run, you'll either watch TV or do your homework. Your opportunity cost of going on a run is Multiple choice question. zero since watching TV and doing homework are free. either the value you place on watching TV or the value you place on doing homework, whichever is smaller. either the value you place on watching TV or the value you place on doing homework, whichever is larger. the sum of the value you place on watching TV and the value you place on doing homework, since you have to give up doing both.

either the value you place on watching TV or the value you place on doing homework, whichever is larger.

The marginal cost of carrying out an activity is the Multiple choice question. smallest cost incurred when undertaking an activity. total cost of undertaking n units of an activity divided by n. increase in total cost that results from carrying out one additional unit of the activity. cost that can be ignored when undertaking an activity.

increase in total cost that results from carrying out one additional unit of the activity.

You are considering whether to go to see a movie. The movie lasts 2 hours and tickets are $15 each. Assuming there are no other costs associated with going to a movie, your opportunity cost of going to the movie is Multiple choice question. just the value of whatever else you would have done for those 2 hours. $15 plus the value of whatever else you would have done for those 2 hours. $15.

$15 plus the value of whatever else you would have done for those 2 hours.

Kimberley is studying for her math exam. If she studies for 5 hours she knows she'll get an 80, and if she studies for 6 hours, she knows she'll get a 90. Thus, the marginal benefit of the 6th hour of studying is Multiple choice question. 15 points. 10 points. 16 points. 90 points.

10 points

Suppose you need to buy a new cell phone charger. You can buy one at a nearby store for $10, or you can buy one online for $8.50, but it'll take 2 days to arrive. If the cost to you of waiting two days to get the charger is $1, then your economic surplus from buying the charger online instead of at the store is:

50 cents

_____ is study of how people make choices under conditions of scarcity and the implications of those choices for society. Multiple choice question. Economic naturalism Economics Normative analysis Opportunism

Economics

Economists believe that scarcity is Multiple choice question. only a problem for some people. has little impact of how people choices in developed countries. a fundamental fact of life for everyone. never a problem for people provided they make prudent decisions.

a fundamental fact of life for everyone.

Having more of one thing usually means having less of another because Multiple choice question. people are bad decision-makers. although we have boundless needs and wants, we have limited resources. there is a limit to how much people need and want.

although we have boundless needs and wants, we have limited resources.

In calculating opportunity cost, the textbook includes Multiple choice question. implicit costs but not explicit costs. neither implicit nor explicit costs. explicit costs but not implicit costs. both implicit and explicit costs.

both implicit and explicit costs.

When applying the Cost-Benefit Principle, it's important to consider Multiple choice question. only out-of-pocket expenses. only the value of foregone opportunities. both out-of-pocket expenses and the value of foregone opportunities.

both out-of-pocket expenses and the value of foregone opportunities.

Economics is the study of

how people make choices under conditions of scarcity.

When deciding whether to take an action, one common decision pitfall is to Multiple choice question. consider the marginal cost and marginal benefit of the action. measure costs and benefits in absolute dollar amounts. ignore the implicit cost of the action. ignore sunk costs.

ignore the implicit cost of the action.

If undertaking an activity includes both explicit and implicit costs, then, according to the textbook, the opportunity cost of that activity Multiple choice question. is the difference between its explicit and implicit cost. cannot be calculated. is the sum of its explicit and implicit costs. is only its implicit cost.

is the sum of its explicit and implicit costs.

Suppose you plan to buy a new pair of running shoes. It's easier to buy them online, but the pair you want is $9 more expensive online than at the mall. According to the Cost-Benefit Principle, you should buy them Multiple choice question. online if the convenience of buying them online is worth less than $9 to you. online if the convenience of buying them online is worth more than $9 to you. at the mall because they're cheaper at the mall.

online if the convenience of buying them online is worth more than $9 to you.

The value of what must be foregone in order to undertake an activity is known as Multiple choice question. economic surplus. opportunity cost. a trade-off.

opportunity cost.

When deciding whether to take an action, sunk costs Multiple choice question. should not be ignored. are easily recovered. should be ignored.

should be ignored.