Chapter 1 Quiz

In which scenario below is a person acting rationally or irrationally according to economists?

A young person is acting rationally when she drops out of a high paying career field like medicine to study poetry. She wants to become a singer/song writer in Nashville's country music scene.

If you get 210 utility points from consuming 3 Krystal Burgers per week:

And receive 250 utility points from consuming 4 Krystal Burgers per week, the marginal benefit of the 4th burger was 40 utility points.

Assume Jack is a rational person and has reached the point where the marginal benefit of eating the 8th Krystal Burger this week is 30 utility points:

And the cost is also 30 utility points. He would stop eating more burgers since the marginal benefit is equal to marginal cost, and therefore his economic surplus has been maximized.

In Economics, a Positive Statement:

Can be either proved true or false since it's a scientific question based on evidence, not opinion.

Marginal Benefit from consuming an extra unit of a good:

Decreases due to the Law of Diminishing Marginal Utility.

Mike Ditka, a famous NFL football coach, has proposed taking the face masks off of players helmets. This proposal is due to:

His belief that the rate of injury will actually go down when the players are unprotected. This statement is supported by the Law or Unintended Consequences which states that the extra protection of the helmets and face masks may actually lead to less safety.

Microeconomics is the study of:

How individual decision makers behave in markets.

The concept of Rational Economic Man in economics:

Is based on an assumption that people will act in their own self interest in a world of scarce goods.

The incentive principle:

Is based on the cost-benefit principle. If the benefit of an activity is greater than its cost a person has an incentive to pursue more of it.

As more of a particular good is produced:

Marginal cost increases due to the Law or Increasing Cost.

According to economists, a person makes a rational decision:

Whenever they make a choice to that maximize the economic surplus.

Self interest and selfishness:

Are different. A person may legitimately act in their own self interest, but selfishness is wrong because it's takes self interest beyond a legitimate point.

The marginal benefit of consuming an additional unit of a good:

Is the change in total benefit from consuming one more unit.

Economists believe that:

It is possible to be self interested without being selfish since the two concepts, while related, are not the same thing.

In economics, scarcity exists when:

The desire for a good exceeds the amount freely available from nature. If the price was zero, there would not be enough for e everyone to have as much as they want.