ECO 2023 Chapter 2

Refer to Table 2-1. A student has only a few hours to prepare for two different exams tomorrow morning. The above table shows alternative possible exam outcomes with three alternative uses of the student's time. The opportunity cost of scoring an 84 on the history exam rather than 76 is: A. 10 points on the economics exam B. 8 points on the history exam C. 7 points on the economics exam D. 12 points on the economics exam

C. 7 points on the economics exam

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from: A. A to B B. B to E C. C to F D. G to F

C. C to F

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income. A. budget constraint B. opportunity set C. utility D. production possibilities frontier

C. utility

Refer to Figure 2-2. When the economy moves from Point A to Point B in the diagram: A. the economy begins using its resources efficiently to produce both food and clothing. B. the economy operates at its productive capacity once it reaches Point B. C. the economy increases production of both clothing and food. D. All of the above occur.

D. All of the above occur.

Refer to Figure 2-2. At Point A in the production possibilities graph shown above, the economy: A. is not using its resources efficiently. B. is using its resources efficiently while producing clothing but no food. C. is using its resources efficiently while producing food but no clothing. D. is using its resources efficiently to produce both food and clothing.

A. is not using its resources efficiently.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible. A. opportunity set B. consumption choice C. time value of money D. risk premium

A. opportunity set

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. A. sunk costs B. opportunity costs C. marginal analysis D. budget constraints

A. sunk costs

The opportunity cost of attending university is likely to include all except which of the following? A. the cost of haircuts received during the school term B. the income you forgo in order to attend classes C. tuition fees D. the cost of required textbooks

A. the cost of haircuts received during the school term

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D. is a subjective valuation that can be determined only by the individual who chooses the action.

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. opportunity cost C. benefit analysis D. marginal analysis

D. marginal analysis

Scarcity exists because of: A. the market mechanism. B. specialization and division of labor. C. the allocation of goods by prices D. unlimited wants and limited resources.

D. unlimited wants and limited resources.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________. A. allocative efficiency B. the production possibilities frontier C. trade-offs D. scarcity

A. allocative efficiency

Marginal thinking is best demonstrated by: A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time. B. deciding to never purchase a coat made with animal skins or furs C. acquiring the information relevant to a choice before making that choice D. measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake

A. choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. A. utility B. marginal benefit C. opportunity cost D. sunk costs

A. utility

Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Which of the following would most likely shift the production possibilities curve inward? A. an increase in the number of hours factories are in use B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time C. an increase in the production of capital goods D. technological progress

B. a decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Scarcity implies that: A. consumers would be willing to purchase the same quantity of a good at a higher price. B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce. D. consumers are too poor to afford the goods and services available.

B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines. A. law of trade-offs B. law of diminishing marginal utility C. production possibilities frontier D. law of increasing marginal utility

B. law of diminishing marginal utility

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. A. utility B. marginal analysis C. the budget constraint D. consumption

B. marginal analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines. A. utility B. sunk costs C. marginal utility D. budget constraint

C. marginal utility

Attending college is a case where the ________________ exceeds the monetary cost. A. budget constraint B. marginal analysis C. opportunity cost D. marginal utility

C. opportunity cost

In many cases, it is reasonable to refer to the ________________ as the price. A. budget constraint B. sunk cost C. opportunity cost D. budget constraint

C. opportunity cost

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: A. nothing, because he enjoys playing basketball more than studying. B. the increase in skill he obtains from playing basketball for that hour. C. the benefit to his grades from studying for an hour D. nothing, because he had a free pass into the sports complex to play basketball.

C. the benefit to his grades from studying for an hour

Refer to Figure 2-1. The most inefficient point depicted is: A. Point A B. Point C C. Point D D. Point G

D. Point G

The opportunity cost of an action: A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action. B. can be determined by adding up the bills incurred as a result of the action. C. can be objectively determined only by economists. D. is a subjective valuation that can be determined only by the individual who chooses the action.

D. is a subjective valuation that can be determined only by the individual who chooses the action.