Chapter 1 econ

Alex recently saw the comedian Ron White perform at the Topeka Performing Arts Center in Topeka, KS. His Total Benefits from seeing this show were $120, while his Total Costs were $70. From this information, it follows that his Economic Surplus A. from attending the show was ($120)-($70) = ($50). B. from attending the show was ($70)-($120) = ($-50) (i.e., negative $50). C. from attending the show was ($70)+($120) = ($190). D. would have been greater if he had instead spent the $120 on Ron White DVDs.

A

Andrea has $75 to spend and wants to purchase either a new amplifier for her guitar or a new MP3 player. Each good costs exactly $75, so she can only purchase one of the two items. This scenario illustrates the basic concept that A. people face tradeoffs. B. most consumers are irrational. C. rational people never respond to incentives. D. free market systems generally do a very poor job of allocating consumption goods.

A

In 2015 High School graduates earned $11,037 per year more than non-High School graduates. If this difference had instead been $8,500 per year, then we would expect A. more people to drop out of school before graduating High School. B. fewer people to drop out of school before graduating High School. C. that nobody would change their behavior. D. more children to start eating breakfast at school.

A

Paula enjoys going to the movies. In July she saw 8 movies in the theatre. Her Marginal Benefit of the 8 th movie was $16, while her Marginal Cost of the 8 th movie was $12. Based upon this information alone, her Economic Surplus A. would have been smaller if she had instead gone to the movies 7 times. B. would have been larger if she had instead gone to the movies 7 times. C. was clearly maximized by going to the movies exactly 8 times. D. would have been larger if she had instead gone to the movies 9 times.

A

The quote on page 17 of the course textbook suggests that Milton Friedman believed that Mother Theresa was A. rational and self-interested. B. rational but not self-interested. C. irrational and not self-interested. D. irrational but self-interested.

A

Which of the following statements is a "Positive Statement"? A. Elvis Presley died on August 16, 1977. B. The possession and use of all "recreational drugs" should be legal. C. Our country would be a better place to live if we decreased spending on national defense and increased spending on healthcare for low income families. D. More than one (perhaps all) of the above answers is correct.

A

Economics is A. the social science that studies human mental functions and behavior, with a focus on phenomena such as perception, cognition, personality, and interpersonal relationships. B. the social science that studies decision making in the face of scarcity and the resulting impact of such decisions on both society as a whole and on the individual members therein C. the social science that studies the allocation and transfer of power in decision-making, systems of governance, and the effects of public policy. D. the art of communicating financial information about a business entity to stakeholders, such as employees, managers, shareholders, and customers.

B

The Cost-Benefit Principle states that A. a society can produce a greater amount of total output when individuals focus their production on those activities for which they have a comparative advantage. B. a person should take an action if and only if the additional benefit of doing so is greater than or equal to the additional cost of doing so. C. a person is more likely to take an action if its benefits rises, and less likely to take an action if its cost rises. D. having more of one thing usually means having less of something else.

B

is the branch of economics which studies how individual decisionmakers behave and interact with each other, often with a focus on how households and firms behave and interact with each other in markets. A. Macroeconomics B. Microeconomics C. Comparative Economic Systems D. Political Science

B

When considering potential government policies, it is important to recognize that A. most businesses are not run by "rational decision makers." B. voluntary trade generally makes sellers better off but buyers worse off. C. if a policy alters the costs and/or benefits for a decision maker, then the decision maker might change his behavior as a result of the policy. D. voters are self-interested but politicians are not.

C

A "Rational Decision Maker" should A. always take every action for which there is a positive Marginal Benefit. B. never take any action for which there is a positive Marginal Cost. C. take an action if and only if the Marginal Benefit of the action is at least as great as the Marginal Cost of the action. D. More than one (perhaps all) of the above answers is correct

C

A "Self-Interested" person A. does not care about the well-being of anyone (including himself). B. cares only about his own well-being (and does not care at all about the well-being of others). C. cares about his own well-being more than the well-being of others. D. cares about the well-being of others more than his own well-being.

C

How many cups of iced coffee Ann should consume at the cost $2.25 per cup? A. 0 B. 4 C. 6 D. 7

C

It appears as if Ann has a _ for iced coffee consumption. A. constant marginal benefit B. increasing marginal benefit C. diminishing marginal benefit D. negative marginal benefit

C

Normative Statements A. attempt to describe how the world actually is or actually functions. B. are scientific in nature, in that given enough research, evidence, and data, they can potentially be shown to be either true or false. C. are supported (either implicitly or explicitly) by the priorities, goals, and value judgments of the person making the statement. D. More than one (perhaps all) of the above answers is correct.

C

Armen Alchain and Gordon Tullock A. wrote a letter to FDR in 1939, advising him to have the U.S. government assist physicists in the U.S. working on research related to the creation of a uranium bomb. B. were the first to recognize that increasing the minimum wage would decrease the unemployment rate of young and unskilled workers. C. argued that automobile accident rates could be decreased by installing "five point harness" seat belts and improved airbags in every car. D. argued that automobile accident rates could be decreased by installing a sharp, irremovable, foot long, iron spike to the steering wheel of every car.

D

In July 2012 professional golfer Adam Scott bogeyed the last four holes of the British Open to lose the tournament to Ernie Els by one stroke. Around the same time flooding in Beijing, China resulted in the death of at least 77 people. If Adam was more upset about the outcome of the British Open than about the loss of life from the flooding in Beijing, then it would seemingly suggest that he A. is not as good of a person as Ernie Els. B. does not care about anyone other than himself. C. is an irrational individual. D. is a self-interested individual.

D

Mike Ditka's suggestion that football related injuries could likely be reduced by have participants play without helmets (or at least without facemasks on their helmets) A. does not make any sense whatsoever when analyzed using the tools of economics. B. implicitly assumes that football players are irrational. C. earned him the Nobel Prize in Economics in 2009. D. relies heavily upon the Incentive Principle.

D

The Incentive Principle states that A. a society can produce a greater amount of total output when individuals focus their production on those activities for which they have a comparative advantage. B. having more of one thing usually means getting by with less of something else. C. an action should be taken if and only if the additional benefits from taking the action are at least as great as the additional costs of doing so. D. if the marginal benefit of an activity increases, then a rational person will engage in more of the activity

D

Total Benefits (i.e., Total Benefits, not Total Economic Surplus) are maximized at A. Q2 B. Q3 C. Q4 D. Q5

D