ECON 101 Test 1

susan quits her administrative job, which pays $40,000 a year, to finish her 4-year college degree. her annual college expenses are $8,000 for tuition; $900 for books; and $2,500 for food. the opportunity cost of attending college for the year is

$48,900

which of the following is the best definition of the opportunity cost of a decision? a. benefits from the best foregone alternative b. actual financial cost of a decision c. the difference between the benefits of the first and second best choices d. the sum of all benefits from all foregone alternatives

a

what are the institutions that help foster the appropriate incentives for economic growth?

a dependable legal system, property rights, and competitive and open markets

adam smith coined the term "invisible hand" to mean

a metaphorical hand that leads individuals to promote social interest by pursuing self-interest

one benefit of trade in realtion to worker ability and productivity

allows for increased specialization and mass-production techniques that lower per unit costs of production

megan has a 1 hr gap in her course load for the fall semester. there are two couses available for her to take: reading piano sheet music and beginning rock climbing. she does not have any experience with piano or rock climbing. in the end, she decides to enroll in the rock climbing course, despite her fear of heights. which activity is a potential trade-off with enrolling in rock climbing? a. learning rock climbing skills b. learning to read piano sheet music c. overcoming her fear of heights d. none of the above

b

in economics, what is meant by "optimal decisions are made at the margin?" a. the idea of the margin is that all economic decisions are made at the very fringes of society. b. the idea of the margin does not help compare trade-offs and is not relevant to decision-making. c. the idea of the margin is related to making decisions while thinking about the benefits and costs of small changes in behavior. d. the concept of the margin was initially developed in 2012 by professor marginus; research is still being done on how it can be used for decision-making

c

the average starting salary of economics majors is just behind that of

chemical and nuclear engineering majors

which decision is least likely to be well explained by marginal analysis? a. deciding whether to take a lunch break or knock on another door as a door-to-door salesperson. b. deciding between watching another episode of your favorite TV series and going to bed. c. deciding whether to do more sit-ups at the gym d. deciding which college to attend. e. deciding how fast to go on the freeway

d

which scenario would least likely change an individual's behavior? a. a basketball team manages to sign a trio of famous basketball stars who them clamor for other players to come join their team to win a guaranteed championship. b. the country of ravamolk enacts a policy to fine companies 20% of their earnings if the safety standards in their factories do not reach acceptable work conditions c. the city of saskatoon chooses to give its residents a penny for each soda can they recycle in an effort to promote environmental awareness d. in an effort to make people eat healthier, the city of bakersville tells its residents to eat wheat bread instead of white bread

d

which demonstrates a scenario with no opportunity cost? a. it's friday night and you stay up late talking and hanging out with your friends b. the chemistry club is giving out free pizza for lunch to all who come to their table c. naomi, age 8, is at a bookstore and chooses to buy a book about a young wizard instead of a math textbook that she would probably never open. d. chez moi and chez nous, two premiere french restaurants with 3 michelin stars, both offer you a full time sous chef job at the same salary. you are ecstatic because you know it is a win-win scenario and you choose to work for chez nous. e. all of these scenarios have an opportunity cost

e

which of the following questions would be studied in the area of microeconomics? a. do interest rates affect net exports? b. will an increase in government spending cause inflation? c. does hosting the olympics decrease the unemployment rate? d. what portion of total spending comes from households? e. what determines the number of hours an individual works?

e

booms and busts refer to

fluctuations in economic activity over time

a grocery store is running a "buy-one-get-another-at-half-off" promotion on a dozen donuts. so the first dozen is $6, and the second would be $3. a person would buy the second dozen if their marginal benefit from the second dozen donuts is

greater than $3

if the central bank creates too much money, ___________ is the result. if the central bank doesn't create enough money, and economic ___________ is the result.

inflation, slowdown

what is thinking on the margin

making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity

a policymaker wants to reduce inflation. in order to make an intelligent decision about how to do so, the policy maker

needs to know the causes of inflation, for example, the government's printing of too much money

the main incentive for business activity is

profit

institutions that support economic growth are the ones that

provide incentives for entrepreneurs to take risks and innovate

which term describes that people have limited resources

scarcity

why can economic booms and busts not be avoided?

the economy is always being struck by unavoidable shocks

the historical rise in living standards of american workers is primarily a result of

the rise in american productivity

in the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as (1) chat with friends, (2) study economics, or (3) eat lunch. this student's opportunity cost is

the value of studying economics

the opportunity cost of a choice is

the value of the opportunities lost

the decisions made by the federal reserve bank sometimes result in negative effects on the economy because

too much money or too little money might indicue inflation or unemployment due to bad timing of decisions

the zimbabwean government printed money as fast as it could for years. as a result,

zimbabwe experienced inflation at a rate of billions of percent per month