MICRO chap 1

Suppose that a store sells candy bars for $0.89 for one and $1.50 for two. The marginal cost of the second candy bar is:

$0.61.

Suppose Mike has three hours of time to spend so he ranks the following activities in order of priority: (1) see a movie, (2) attend a ball game, (3) study economics. Assume that each activity takes three hours. What is Mike's opportunity cost of seeing the movie?

attending a ball game

Tim woke up this morning with a stomachache and decided to skip class in order to get more rest. What is the opportunity cost of Tim's decision to sleep in?

the value of attending the class he decided to miss

If you were not studying economics, you could be doing one of the following: sleeping in (which you value at $5), playing cards with your friends (which you value at $10), or working (you would have earned an extra $8). The opportunity cost of studying economics is therefore:

$10

_____ people are forced to make tradeoffs.

All

Rational behavior requires thinking at the margin. Which example represents this type of thinking?

All of these examples represent thinking at the margin.

_____ is how well resources are used and allocated.

Efficiency

_____ is the fairness of various issues and policies.

Equity

Which statement does NOT involve thinking at the margin?

I worked eight hours today

Paying a salesperson more for increased sales is an example of

Incentive

Students who never miss class and study hard generally earn higher grades than those who do not. This is an example of:

Incentives

_____ costs include the time and money that could have been spent on another highly valued activity.

Opportunity

Which question is NOT an example involving marginal analysis?

Should K-Mart rebrand all its stores to using the Sears name?

Which question would be considered a normative question?

Should obstacle races be regulated to ensure the safety of its participants?

When economists assume people make rational decisions, it means that:

a rational person will respond to the benefits and costs associated with incentives.

Marginal analysis would put an emphasis on:

additional costs and benefits

The opportunity cost of undertaking an activity is defined as the:

benefit forgone by not undertaking the next-best activity.

Economics is a social science that involves the study of how individuals, firms, and societies:

choose among alternatives to satisfy their unlimited wants.

Opportunity costs:

influence all economic decisions.

The study of economics:

is about people making decisions regarding their use of scarce resources.

Resources are:

limited, but wants are unlimited

When economists use the word "additional," they generally mean:

marginal

You will take the day off work if:

marginal costs are less than marginal benefits.

The highest valued alternative that is forgone when you choose an action is called its:

opportunity cost

Employers give stock options to full-time employees who have been on the job more than three years. This is an example of:

people following incentives

Hitting your snooze alarm before you get out of bed is an example of:

thinking at the margin

Scarcity is BEST defined as when:

unlimited wants exceed limited resources

Because of scarcity:

we face tradeoffs in nearly every choice we make.

Thinking at the margin involves:

weighing the impact of one additional activity