Econ chpt. 1

Ashley eats two bananas during a particular day. The marginal benefits she enjoys from eating the second banana

Can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. Which principle of economics does this illustrate? a. People face tradeoffs. b. The cost of something is what you give up to get it. c. Rational people think at the margin. d. People respond to incentives.

D

A society allocates its scarce resources to various jobs. These scarce resources include

All of the above are correct.

According to Adam Smith, the success of decentralized market economies is primarily due to..

Individuals pursuit of self interest

Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?

It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.

Which of the following is a principle concerning how people interact?

Markets are usually a good way to organize economic activity.

A construction company has built 30 houses so far this year at a total cost to the company of $7.5 million. If the company builds a 31st house, its total cost will increase to $7.5 million. Which of the following statements is correct?

a. For the first 30 houses, the average cost per house was 250,000. b. ... c. ... d. All of the above are correct. Correct

A barber currently cuts hair for 50 clients per week and earns a profit. He is considering expanding his operation in order to serve more clients. Should he expand? a. Yes, because cutting hair is profitable b. No, because he may not be able to sell more services c. It depends on the marginal cost of serving more clients and the marginal revunue he will earn from serving more clients. d. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

a. Yes, because cutting hair is profitable b. No, because he may not be able to sell more services c. It depends on the marginal cost of serving more clients and the marginal revunue he will earn from serving more clients. Correct d. It depends on the average cost of serving more clients and the average revenue he will earn from serving more clients.

A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies a. enhance equality. b. reduce efficiency. c. reduce the reward for working hard. d. All of the above are correct.

a. enhance equality. b. reduce efficiency. c. reduce the reward for working hard. d. All of the above are correct. Correct

Consider Mandy's decision to go to college. If she goes to college, she will spend $20,000 on tuition, $10,000 on room and board, and $2,000 on books. If she does not go to college, she will earn $18,000 working in a store and spend $8,000 on room and board. Mandy's cost of going to college is a. 32,000 b. 42,000 c. 50,000 d. 58,000

b

Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct? Answers: a. For the first 24 houses, the average cost per house was $205,000. b. The marginal cost of the 25th house, if it is built, will equal $250,000. c. If the company can sell the 25th house for at least $202,000, then it should build it. d. All of the above are correct.

b. The marginal cost of the 25th house, if it is built, will equal $250,000.

Annie is an excellent baker and Sam has a plentiful farm. If Sam trades eggs and butter to Annie for some of Annie's bread and pastries,

both Sam and Annie are made better off by trade.

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal benefit of a corporate job decreased. b. cost of a corporate job increased. c. cost of teaching increased. d. benefit of teaching increased.

c. cost of teaching increased.

A worker in Vietnam can earn $6 per day making cotton cloth on a hand loom. A worker in the United States can earn $85 per day making cotton cloth with a mechanical loom. What is the likely explanation for the difference in wages? a. U.S. textile workers belong to a union, whereas Vietnamese textile workers do not belong to a union. b. There is little demand for cotton cloth in Vietnam and great demand in the U.S. c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom. d. Vietnam has a low-wage policy to make its textile industry more competitive in world markets.

c. Labor is more productive making cotton cloth with a mechanical loom than with a hand loom.

You have eaten two bowls of ice cream at Sundae School Ice Cream store. You consider eating a third. As a rational consumer you should make your choice by comparing a. the benefits from eating all three bowls of ice cream to how much three bowls of ice cream costs. b. the benefits from eating all three bowls of ice cream to how much one more bowl of ice cream costs. c. the benefits from eating one more bowl of ice cream to how much three bowls of ice cream costs. d. the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

d. the benefits from eating one more bowl of ice cream to how much one more bowl of ice cream costs.

Almost all variation in living standards is attributable to differences in countries

productivity

A marginal change is a

small, incremental adjustment

You go to the movieplex where movies ordinarily cost $9. You are intending to see a movie for which you have a $3 off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?

the amount you value the first movie + $3

The "invisible hand" refers to

the free market

A rational decision-maker takes an action if and only if

the marginal benefit of the action exceeds the marginal cost of the action