Macroeconomics (chpt.1)
Suppose that the extra cost to Tim of a third glass of soda is zero because he's at a restaurant that gives free refills. According to the Cost-Benefit Principle Tim should:
drink the third glass of soda if the extra benefit of doing so is positive
Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______.
economic surplus, 15,000-12,000=3,000
The marginal benefit of an activity is the:
extra benefit associated with an extra unit of the activity.
If a person takes an action if, and only if, the extra benefits from taking that action exceed the extra costs, then that person is:
following the cost-benefit principle
Economics is best described as the study of:
how people make choices in the face of scarcity and the implications of those choices for society as a whole
The Incentive Principle states that a person:
is more likely to take an action if its benefit increases
The Cost Benefit Principle indicates that an action should be taken if:
its extra benefit is greater than or equal to its extra cost
If individuals are rational, they should choose actions that yield the:
largest economic surplus
Forest lives in complete isolation in Montana. He is self-sufficient and feeds himself through hunting, fishing and farming. Which of the following statements about Forest is true?
Forest must make trade offs
Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6, which brought your cumulative GPA down. What must be true?
last semester's grade was lower than your overall GPA
A rational person
makes choices based on added benefits and added costs
The extra benefit that results from carrying out one additional unit of an activity is the ________ of the activity.
marginal benefit
The extra cost that results from carrying out one additional unit of an activity is the ________ of the activity.
marginal cost
Dean should play golf instead of preparing for tomorrow's exam in economics if:
the economic surplus from playing golf is greater than the economic surplus from studying
According to the Cost-Benefit Principle, you should go see the Star Wars movie with your friends this week-end if:
the extra benefits of seeing the movie are greater than the extra costs of seeing the movie
The opportunity cost of an activity includes the value of:
the next best alternative that must be forgone
Alex received a four-year scholarship to State U. that covered tuition and fees, room and board, and books and supplies. If Alex becomes a full-time student, then:
the opportunity cost of attending State U includes the money Alex could have earned from working for four years
The economic surplus of an action is:
the difference between the benefit and the cost of taking an action
You save $10 on gas every week because you take the bus to school. You have class 5 days a week. What is your average benefit per day of taking the bus to school?
10/5=$2
Suppose the total benefit of watching 1 baseball game is 100, the total benefit of watching 2 games is 120, and the total benefit of watching 3 games is 125. In this case, the marginal benefit of watching the 3rd game is:
125-120=5
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. The benefit to Matt of buying his books at the university bookstore instead of online is:
175-170=$5
Amy is thinking about going to the movies tonight. A ticket costs $15 and she will have to cancel her dog-sitting job that pays $20. The cost of seeing the movie is:
20+15=35 dollars
Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than:
25,000-12,000=$13,000 per year
Suppose the most you would be willing to pay for a plane ticket home is $250. If you buy one for $175, then your economic surplus is:
250-175=$75
For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your average cost for a meal is:
600/100=$6
For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal is:
600/150=$4
Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decides to stay home and work on the paper. According to the Scarcity Principle, the reason Josh doesn't go to the game is that:
Josh can't go to the game and finish his paper
Moe has a big exam tomorrow. He considered studying this evening, but decided to hang out with Curly instead. If neither activity involves any explicit costs, and Moe always chooses rationally, it must be true that:
Moe gets more benefit from spending time with Curly than studying
All else equal, relative to a person who earns minimum wage, a person who earns $30 per hour has:
a higher opportunity cost of taking the day off work
The Incentive Principle is an example of:
a positive economic principle.
Economists believe the Cost-Benefit Principle is:
a simple but useful model of how people make choices
The fact that most people make some decisions based on intuition rather than calculation is:
consistent with the cost-benefit model because most people intuitively weigh costs and benefits
The Scarcity Principle applies to:
all decisions, everyone
Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (the value of forgone activities) is:
an application of the cost-benefit principle
Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. The decision Chris must make is:
an economic problem because Chris has only one hour, and engaging in one activity means giving up the other
Dividing the total cost of n units of an activity by n reveals the:
average cost
You are trying to decide whether to purchase the latest Harry Potter book online or borrow it from the library, but going to the library takes more time than ordering a book online. Regardless of how you get the book, its benefit to you is the same. If the cost of buying the book online is $13 then you should:
borrow the book from the library if the cost of doing so is less than $13
The marginal cost of an activity is the:
change in the total cost of the activity that results from carrying out an additional unit of the activity
Economics is the study of:
choice in the face of limited resources
An implication of scarcity is that
people must make trade-offs
The Cost Benefit Principle:
provides an abstract model of how people should choose between alternatives
The Scarcity Principle tells us__________ and the Cost-Benefit Principle tells us__________
that choices must be made, how to make good choices
If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because:
the costs will be understated
The average benefit of n units of an activity is the:
the total benefits of n units divided by n
Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is:
the value she places on seeing the movie
Economists recognize that because people have limited resources:
they have to make trade-offs
The cost benefit model used by economists:
useful because most people follow it most of the time.
Whether studying the output of the U.S economy or how many classes a student will take, an unifying concept is that:
wants are unlimited and resources are scarce, so trade-offs have to be made
Jamie must choose to either mow the lawn or wash clothes. if she mows the lawn she will earn $30, if she washes clothes she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Jamie will therefore choose to_______ because it generates a _________ economic surplus
wash clothes, bigger
The Scarcity Principle states that:
with limited resources, having more of one thing means having less of another