Econ Midterm
The downward slope of the production possibilities curve illustrates the:
Scarcity Principle.
Suppose a retail store was offering 10 percent off list prices on all goods. The benefit of the 10 percent savings is:
positively related to the list price of the good.
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.
An increase in an economy's productive resources will lead the production possibilities curve to:
shift outward
Suppose Earth Movers & Shakers needs to fill an order for 60 tons of ore in a single day. If it has no other orders for that day, it should:
take it all from Middle Drift.
The accompanying figure shows Avery's weekly production possibilities curve for scarves. For Avery, the opportunity cost of making a red scarf is:
1 blue scarf.
As soon as you see the other island's PPC, you realize there are:
gains from trade because your island has a comparative advantage in coconuts.
According to the Principle of Increasing Opportunity Cost, in expanding the production of any good, we should start by utilizing the resources that:
have the lowest opportunity cost.
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Your economic surplus from going to work instead of seeing SPAM on Saturday is:
$1
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If the Chicago-Atlanta round-trip air fare were $350, should you use the coupon to go to Miami?
Yes, your economic surplus would be $50.
In general, individuals and nations should specialize in producing those goods for which they have a(n):
comparative advantage.
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.
Refer to the accompanying table. Based on their comparative advantages, Pat should specialize in _______, and Corey should specialize in _______.
delivering pizza; making pizza
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. Given that driving to campus to buy the concert ticket was rational for Matt, Matt should:
drive to campus to buy the books because the $5 he would save is more than he saved by driving to campus to buy the concert ticket.
The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase.
3.0GHz
Refer to the accompanying table. Martha's opportunity cost of making of a pie is:
3/4 of a cake
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 the game and finish the paper.
Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?
Lewis should specialize in pies, and Cathy should specialize in cakes.
Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work?
Pat should drive if saving half an hour is worth $0.50 or more.
If a person takes an action if, and only if, the extra benefits from taking that action are at least as great as the extra costs, then that person is:
following the Cost-Benefit Principle.
Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of:
inconsistent reasoning; saving $20 is saving $20.
The following accompanying table shows the relationship between the speed of a computer's CPU and its benefits and costs. Assume that all other features of the computer are the same (that is, CPU speed is the only source of variation), and only the CPU speeds listed below are available for purchase.
its marginal benefit is less than its marginal cost.
Refer to the accompanying figure. The opportunity cost of increasing medical care from 200 to 400 units is ______ the opportunity cost of increasing medical care from 400 to 600 units.
less than
The field of economics that would be most concerned with a recent fall in interest rates is:
macroeconomics.
The extra cost that results from carrying out one additional unit of an activity is the _____ of the activity.
marginal cost
Points that lie below the production possibilities curve are inefficient because:
more of one good could be produced without producing less of the other.
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 working for four years.
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:
$75
The opportunity cost of moving one miner from Middle Drift to another mine is:
5 tons per day.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. Should you use the frequent flyer coupon to go to Miami?
No, your benefit is less than your cost.
Economic growth can result from a(n)
increase in the amount of productive resources.
One reason there is political opposition to international trade is that:
not everyone benefits from trade.
The accompanying table below shows the relationship between the number of times you get your car washed each month and your total monthly benefit from car washes. Each car wash costs $15.
$15
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?
$2
You have two options for how to spend the afternoon. You can either go see a movie with your roommate or work as a tutor for the Math Department. From experience, you know that going to see a movie gives you $20 worth of enjoyment, and with your student discount, a movie ticket only costs $12. If you spend the afternoon working as a math tutor, you will get paid $45. On a typical day, you wouldn't be willing to spend the afternoon working as a math tutor for less than $35. What is your opportunity cost of seeing a movie this afternoon?
$22
Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending State College is:
$35,000
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:
$4
Jack has a ticket to see the Foo Fighters for which he paid $30 yesterday. He takes an unpaid day off from work to get ready for the concert. When he arrives at the concert, five different people offer him $70 for his ticket. Jack decides to keep his ticket. At the time he makes this decision, his opportunity cost of seeing the Foo Fighters is:
$70.
Refer to the accompanying table below. The marginal cost of the 4th unit of activity is: 0$0$0 1$2$12 2$6$22 3$12$30 4$20$36 5$30$40 6$42$42 7$56$43
$8
Suppose Smith and Jones begin by producing 16 computers and 0 calculators per hour. If they wish to produce 14 computers and 40 calculators per hour efficiently, then Smith should spend ______, and Jones should spend ______.
1 hour making computers; 40 minutes making computers and 20 minutes making calculators
Based on last month's data, Ralph's opportunity cost of selling a truck is selling:
1/4 of a car.
Both islands specialize exclusively in the product for which they have a comparative advantage. You have agreed to give 350 coconuts to the other island in exchange for 1,300 fish. After the trade, your island has a total of ______ coconuts and ______ fish.
150; 1,300
If Smith and Jones devote all of their resources to producing computers, then the maximum number of computers they can produce in an hour is:
16
If Al has an absolute advantage over Beth in preparing meals, then:
Al can prepare more meals in a given time period than Beth.
If Ana devotes all her time to making fudge, she can make 3 pounds of fudge an hour, and if she devotes all her time to making toffee, she can make 2 pounds of toffee an hour. If Leo devotes all his time to making fudge, he can make 4 pounds of fudge an hour, and if he devotes all his time to making toffee, he can make 5 pounds of toffee an hour. Which of the following statements is correct?
Ana has the comparative advantage in fudge, but Leo has the absolute advantage in fudge.
Refer to the accompanying figure. If Pat and Chris were to specialize in the task in which each has a comparative advantage:
Chris would remove trash and Pat would plant bulbs.
Choosing to study for an exam until the extra benefit (e.g., improved score) equals the extra cost (e.g., the value of foregone activities) is:
an application of the Cost-Benefit Principle.
Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?
Dan should specialize in sandwiches, and Tracy should specialize in smoothies.
The last time gas prices increased drastically, sales of large Sport Utility Vehicles (SUVs) fell. Why?
Higher gas prices increased the cost of driving a SUV.
Both of Moe's professors require at least a 65 to pass and a 90 to earn an A. Which of the following is true?
Moe can pass both classes.
You paid $35 for a ticket (which is non-refundable) to see SPAM, a local rock band, in concert on Saturday. Assume that $35 is the most you would have been willing to pay for a ticket. Your boss called, and she is looking for someone to cover a shift on Saturday at the same time as the concert. You would have to work 4 hours and she would pay you $11/hr. The psychic cost to you of working is $2/hr. Should you go to the concert instead of working Saturday?
No, the benefit of going to the concert is less than the cost.
Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfare is $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1,400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfare is $450. If you do not use the frequent-flyer coupon to fly to Miami, should you go to Miami?
No, your benefit is less than your cost.
Refer to the accompanying figure. Which of the following is true?
Points B, C, E and F are efficient
As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ______.
increase
Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools _____ Karl's opportunity cost of growing artichokes.
increased
The Incentive Principle states that a person:
is more likely to take an action if its benefit increases.
Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is:
the reciprocal of the opportunity cost of the good measured on the horizontal axis.
One concern regarding the North American Free Trade Agreement (NAFTA) was that it would lead:
unskilled workers in the United States to lose their jobs.
