Econ 202: Module 2

An item has utility for a consumer if it A. is something everyone else wants. B. generates enjoyment or satisfaction. C. is scarce. D. has a high price.

B

Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A. equitably B. selfishly C. emotionally D. rationally

D

Holding all other personal characteristics-such as age, gender, and income-constant, economists would expect that: A. people with health insurance are more likely to be overweight than people without health insurance. B. people with health insurance are equally likely to be overweight as people without health insurance. C. people with health insurance are less likely to be overweight than people without health insurance. D. there is no correlation between having health insurance and being overweight.

A

Marginal utility is: A. extra satisfaction received from consuming one more unit of a product. B. total satisfaction received from consuming a given number of units of a product. C. satisfaction achieved when a consumer has had enough of a product. D. average satisfaction received from consuming a product.

A

Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that: A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

A

The principle of opportunity cost is that A. the economic cost of using a factor of production is the alternative use of that factor that is given up. B. in a market economy, taking advantage of profitable opportunities involves some money cost. C. taking advantage of investment opportunities involves costs. D. the cost of production varies depending on the opportunity for technological application.

A

The revenue received from the sale of ________ of a product is a marginal benefit to the firm. A. an additional unit B. only profitable units C. no units D. the total number of units

A

Amy can study for an hour or spend that hour sleeping or going out for dinner. If she decides to study for the hour, the opportunity cost of the hour spent studying is: A. definitely going out to dinner because she must eat at some time. B. sleeping or going out for dinner, whichever she would have preferred the most. D. definitely going to sleep. E. sleeping and going out for dinner. F. studying, since this is the choice she opted for.

B

The extra cost associated with undertaking an activity is called: A. foregone cost. B. marginal cost. C. opportunity cost. D. net loss.

B

The opportunity cost of going to an outdoor music festival is A. zero because there are no overhead costs for an outdoor festival. B. equal to the highest value of an alternative use of the time and money spent on the festival. C. the enjoyment you receive from going to the festival. D. the cost of the festival ticket only. E. the value of the time spent at the festival.

B

By definition, economics is the study of: A. how to make money in the stock market. B. supply and demand. C. the choices people make to attain their goals, given their scarce resources. D. how to make money in a market economy.

C

Economists assume that the goal of consumers is to A. spend all their income. B. make themselves as well off as possible. C. consume as much as possible. D. do as little work as possible to survive.

C

Making "how much" decisions involves A. calculating the total costs of the activity and determining if you can afford to incur that expenditure. B. calculating the total benefits of the activity and determining if you are satisfied with that amount. C. determining the additional benefits and the additional costs of that activity. D. calculating the average benefit and the average cost of an activity to determine if it is worthwhile undertaking that activity.

C

Making optimal decisions "at the margin" requires A. making borderline decisions. B. making decisions according to one's whims and fancies. C. Correct weighing the costs and benefits of a decision before deciding if it should be pursued. D. making consistently irrational decisions.

C

The best alternative use of a resource is referred to as its: A. 0 since he will no longer be earning a salary B. depends on the "going rate" of museum employees C. at least $80,000 D. the value he attributes to the joy of working at a museum

C

Economists assume that individuals: A. prefer to live in a society that values fairness above all else. B. will never take actions to help others. C. behave in unpredictable ways. D. are rational and respond to incentives

D

Economists assume that rational behavior is useful in explaining choices people make A. because irrational people do not make economic choices. B. even though people rarely, if ever, behave in a rational manner. C. because individuals act rationally all the time in all circumstances. D. even though people may not behave rationally all the time.

D

John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John?: A. answering his e-mail B. attending a movie, studying for an economics exam, and answering his e-mail C. studying for an economics exam D. attending a movie

D

On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is: A. zero because you do not have to pay money to use the library. B. not clear because not enough information is given. C. working out at the gym, having breakfast with friends, and sleeping late. D. working out at the gym.

D

The extra cost associated with undertaking an activity is called A. foregone cost. B. opportunity cost. C. net loss. D. marginal cost.

D

The highest valued alternative that must be given up to engage in an activity is the definition of A. marginal benefit B. marginal cost C. economic equity D. opportunity cost

D

The additional cost to a producer of hiring an additional unit of labor is called the marginal cost. (T/F)

True

When voluntary exchange takes place, both parties gain from the exchange. (T/F)

True