ECN 211 Ch 2

Which of the following statements is positive? 1. Social security benefits are not taxed. 2. There is a limit to the income each year to which the FICA tax applies, but that is fair, since there is a limit to ssb. 3. I am absolutely positive that there is a better way.

1. Social security benefits are not taxed.

It is said that the rational consumer will act according to his or her self-interest, and that self-interest can include a concern for one's family and friends, but not often society as a whole. Which of the following illustrates this type of decision?

1. The boat rental was worth the additional fish catch, regardless how little fish we left behind. 2. The rental of recreational vechicles for use in national parks is responsive to the price charged, but not to concenrs of noise pollution.

Which of the following statements reflects marginal decision-making? 1. Stayin in this rental cottage longer would be nice, but the cottage next door is more attractive. 2. The total cost of the program is equal to the total benefits. 3. If we double the order to a dozen doughnuts, we will pay only 20% more.

3. If we double the order to a dozen doughnuts, we will pay only 20% more.

Identify the normative statement(s) among the following statement(s). 1. The federal government's spending is greater than its revenue to the treasury 2. The federal government budget deficit reached 4% of GDP last year. 3. The federal government spends too much.

3. The federal government spends too much.

Making an economically rational decision requires..

Considering the prospective benefits and costs to oneself.

The slope of a budget constraint line is influenced by...

How much one item costs compared to the cost of the other item.

To make an economically rational decision, marginal cost should be compared to

Marginal benefit.

The production possibilities model is illustrates an inverse relationship between two goods or services because...

Production of different types will compete for limited resources.

In order to satisfy as many wants as possible, it is necessary to achieve ALLOCATIVE efficiency,

Since otherwise output may go to where it is less valued.

An Uber driver faces costs for driving that include sunk costs like insurance that contribute to the average cost per mile of $.50. Yet when a rider offers to pay less than that for a ride, the driver agrees because..

Sunk costs like auto insurance (in this case) do not increase as driving increases.

Suppose that there are only two types of output in a country: nuclear missiles and consumer goods. All else being constant, as the nation produces more missiles...

The greater the opportunity cost will be of satisfying consumer wants.

The musician was known for multiple encore performances, but had limited stamina and a rational mind. Even she would eventually call it a night when, by her judgement

The marginal cost is greater than the marginal benefit of an additional encore.

A restaurant chain sponsors a charity that provides support to the parents of children being treated for cancer. How would the use of company funds for this purpose be justified by a business whose goal is to maximize profit?

The money spent is worth the boost it gives to corporate image.

Scarcity is imposed on individual households in the form of income and...

The prices of the goods that we may purchase.

A budget constraint model differs from production possibilities model in that, typically...

The production possibilities model demonstrates diminishing returns.

Because of ________ if a city government decides to spend money on beautifying its downtown and attracting tourism to its city when no money has been devoted to those efforts before, then gains in tourism may be significant.

The production possibility frontier.

Normative statements are based upon...

Value judgments

The house that Jeanne inherited from her mother can rent for $2000/month, but Jeanne decides to allow her brother to stay there for only half of that. This decision carried with it a...

Zero monetary cost but a $1000 per month oppotunity cost.

The theory of rational behavior...

is an assumption that economists make to have a useful model for how decisions are made.