Module 1 Homework

The cost-benefit principle states that _____ are the incentives that shape decisions. a.)costs and benefits b.)framing effects c.)incomes d.)opportunity costs

a.)costs and benefits

Which of the following five scenarios illustrate markets in action? (i) You rent a book at the university bookstore. (ii) You bargain at a street stall. (iii) You mow your own lawn. (iv) You get a manicure at a nail salon. (v) You grow your own vegetables and consume them yourself.

(i), (ii), (iv)

As a result of technological innovation, automated water pumps are being installed on the farms of Kenyan tomato farmers. As a result of the increased use of automated water pumps, the equilibrium price of tomatoes will: a.) fall, due to a rise in supply. b.) fall, due to a fall in demand. c.) rise, due to a fall in supply. d.) rise, due to a rise in demand.

a.) fall, due to a rise in supply.

Dependencies between your own choices reflect the fact that: a.)resources are spread across varying markets. b.)you have limited resources. c.)society has limited resources. d.)resources can be spread across time.

b.)you have limited resources.

Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte? a.)$2 b.)$1 c.)$4 d.)$6

c.)$4

How is the economic surplus generated by a decision calculated? a.)It is the sum of costs arising from the decision. b.)It is the total benefits plus total costs arising from the decision. c.)It is the total benefits minus total costs arising from the decision. d.)It is the sum of benefits arising from the decision.

c.)It is the total benefits minus total costs arising from the decision.

In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction. a.)both the buyer and the seller b.)neither the buyer nor the seller c.)only the seller d.)only the buyer

a.)both the buyer and the seller

Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a.)less; $75 b.)less; $150 c.)greater; $75 d.)greater; $150

b.)less; $150

An individual demand curve is a graph: a.)that plots the quantity of an item that someone plans to buy, at one single price point. b.)that plots the quantity of an item that someone plans to buy, at each price. c.)that plots the quantity of an item that a seller plans to sell, at each price. d.)that plots the market price of a product at different points in time.

b.)that plots the quantity of an item that someone plans to buy, at each price.

Paint and paintbrushes are complements. If the price of paint rises, we can expect: a.)the quantity demanded of paint to increase. b.)the demand for paintbrushes to decrease. c.)the demand for paintbrushes to increase. d.)the quantity demanded of paintbrushes to remain unchanged.

b.)the demand for paintbrushes to decrease.

You're shopping online, and you place an item in your virtual cart. Two days later, you return to the virtual cart to check out and find that the item is now more expensive. Assuming that the market is competitive, what could explain the price increase? a.) There is a surplus of the item. b.) There is decreased demand for the item. c.) There is a shortage of the item. d.) New sellers are offering the same product.

c.) There is a shortage of the item.

Suppose that you have a pumpkin stall at a farmer's market, and the Halloween season arrives. You know that your customers will want to buy many pumpkins to decorate their houses and make pumpkin pies. Which of the following is a likely result of this scenario? a.) You will wind up with many unsold pumpkins. b.) You will take fewer pumpkins to the market to sell. c.) You can charge a higher price per pumpkin. d.) You will be able to sell only the highest-quality pumpkins.

c.) You can charge a higher price per pumpkin.

The United Kingdom plans to end the use of gas-powered and diesel-powered cars by the year 2040. At the same time, car manufacturers, such as General Motors and Nissan, are increasing the number of electric car models they produce. Based on this information, which of the following statements is/are correct? (i) If the supply of new electric cars is greater than the demand for new electric cars, then the price of electric cars will fall in the future.(ii) The demand for gasoline will fall in the future. (iii) The demand for electricity will rise in the future. (iv) The demand for diesel will rise in the future.

(i), (ii), (iii)

Graphically, shortages will always occur: a.) at prices below the equilibrium price. b.) at prices above the equilibrium price. c.) when the quantity supplied exceeds the quantity demanded. d.) at the equilibrium price.

a.) at prices below the equilibrium price.

An equilibrium price is: a.) determined by the intersection of the demand and supply curves. b.) the price that occurs when there is a surplus. c.) the price that prevails when there is a shortage. d.) the price that prevails when quantity supplied is less than quantity demanded.

a.) determined by the intersection of the demand and supply curves.

Quantity demanded is on the horizontal axis when you plot a demand curve and shows the: a.)amount of a good that a person is willing to buy at each price. b.)amount of a good that a seller is willing to sell at a particular price. c.)amount of a good that a person actually buys at the market price. d.)amount where opportunity cost is equal to the marginal benefit.

a.)amount of a good that a person is willing to buy at each price.

Joshua Murphy is planning on studying late into the night for his economics exam. How many cups of coffee should he buy tonight? Joshua should keep buying coffee throughout the evening until the marginal: a.)benefit of purchasing one more coffee equals the marginal cost. b.)cost of purchasing one more coffee is positive. c.)benefit of purchasing one more coffee is positive. d.)benefit of purchasing one more coffee is less than the marginal cost.

a.)benefit of purchasing one more coffee equals the marginal cost.

Diane Jacobs is a student studying economics and currently working on her class schedule for next semester. She considers the fact that more and more data is available every day and that data interpretation skills are learned by taking additional economics courses in her course selection. This acknowledgment highlights the dependencies that exist: a.)between markets. b.)through time. c.)between her own individual choices. d.)between people or businesses in the same market.

a.)between markets.

According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is _____ the marginal cost of an additional item. a.)equal to b.)less than c.)greater than d.)greater than or less than

a.)equal to

When you get hired for a well-paying job, you will most likely view older used cars as a.)inferior goods. b.)complementary goods. c.)substitute goods. d.)normal goods.

a.)inferior goods.

The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a.)interdependence b.)cost-benefit c.)opportunity cost d.)marginal

a.)interdependence

Decisions should reflect the _____ costs, rather than just the _____ costs. a.)opportunity; financial b.)nonfinancial; financial c.)opportunity; nonfinancial d.)financial; marginal

a.)opportunity; financial

Graphically, the equilibrium quantity can be identified as the: a.) maximum quantity that sellers are willing to sell. b.) quantity corresponding to the intersection of the demand and supply curves. c.) quantity corresponding to the intersection of the demand curve and the price axis. d.) maximum quantity that buyers are willing to buy.

b.) quantity corresponding to the intersection of the demand and supply curves.

Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a.)The marginal principle b.)The opportunity cost principle. c.)The cost-benefit principle. d.)The interdependence principle.

b.)The opportunity cost principle.

You eat M&Ms every day. When you go to the store to buy some, you find that M&Ms are more expensive than they were last month. Which of the following could explain why M&Ms are more expensive? a.) Consumers are now purchasing fewer M&Ms compared to other types of chocolates. b.) A new robot has been installed at the Mars chocolate company that reduces the time needed to produce M&Ms by half. c.) The supply of cacao beans, used to produce chocolate, has fallen around the world. d.) A new study finds that the benefits of eating chocolate are not as great as previously thought.

c.) The supply of cacao beans, used to produce chocolate, has fallen around the world.

Which of the following five scenarios illustrate markets in action?(i) You rent a book at the university bookstore.(ii) You bargain at a street stall.(iii) You mow your own lawn.(iv) You get a manicure at a nail salon.(v) You grow your own vegetables and consume them yourself. a.) a centrally planned market. b.) perfect competition. c.) a market in action. d.) a shortage.

c.) a market in action.

When there is a shortage of highly skilled workers in a particular region, the: a.) supply of jobs for highly skilled workers increases. b.) demand for skills education decreases. c.) demand for skills education increases. d.) demand for highly skilled workers increases.

c.) demand for skills education increases.

A shortage occurs when: a.) there is excess production. b.) when there is insufficient demand. c.) quantity demanded exceeds quantity supplied. d.) quantity supplied exceeds quantity demanded.

c.) quantity demanded exceeds quantity supplied.

If a store runs a sale on a product to clear out its stock, we can conclude that: a.) the demand for the product is larger than the supply of the product. b.) there was a shortage of the product in the store. c.) there was a surplus of the product in the store. d.) the product must be very close to its expiration date.

c.) there was a surplus of the product in the store.

An equilibrium in a market occurs: a.) when suppliers have sold all the goods and services that they have produced. b.) at the halfway point on the price axis. c.) when the quantity supplied equals the quantity demanded. d.) at the halfway point on a demand curve.

c.) when the quantity supplied equals the quantity demanded.

You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should ____ to dinner with your friend because the benefit of doing so is _____ than the cost. a.)go; less b.)not go; greater c.)go; greater d.)not go; less

c.)go; greater

Jonathan Mendez is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is ____ in his opportunity cost calculations and represents a _____ cost. a.)not included; sunk b.)not included; financial c.)included; nonfinancial d.)included; financial

c.)included; nonfinancial

The opportunity costs of attending college include the: a.)cost of clothes to wear at school. b.)effort and hard work. c.)potential income that could be earned working. d.)cost of room and board.

c.)potential income that could be earned working.

When there is a shortage of highly skilled workers in a particular region: a.) the incomes of highly skilled workers fall. b.) unemployment rises among highly skilled workers. c.) there is a corresponding surplus of low-skilled workers in the region. d.) highly skilled workers can negotiate higher salaries.

d.) highly skilled workers can negotiate higher salaries.

The __________ suggests, decisions about quantities are best made incrementally. a.)interdependence principle b.)cost-benefit principle c.)opportunity cost principle d.)marginal principle

d.)marginal principle

A downward-sloping demand curve implies: a.)there is a positive relationship between price and quantity demanded. b.)buyers are willing to buy less when prices are lower. c.)there is no relationship between price and quantity demanded. d.)there is an inverse relationship between price and quantity demanded.

d.)there is an inverse relationship between price and quantity demanded.

Which of the following scenarios illustrates the law of demand? a.)A research company finds that the more expensive a particular brand of a designer handbag, the more that consumers are willing to purchase the brand. b.)Kathleen eats more steak when the price is low, and less when the price is high. c.)Francis does not care about the price of coffee at the coffee shop - he must buy two cappuccinos every day, regardless of the price. d.)John likes to drink spring water. At $2 he buys four bottles of water, and at $1.50 he still buys four bottles of water.

b.)Kathleen eats more steak when the price is low, and less when the price is high.

A normal good is: a.)a good for which higher income causes a decrease in demand. b.)a good for which higher income causes an increase in demand. c.)a good which is normally purchased by many consumers. d.)a good which is only purchased by high-income consumers.

b.)a good for which higher income causes an increase in demand.

Kathleen Alvarado is binge-watching her favorite show on Netflix. She is attempting to decide how many more episodes to watch. Kathleen should continue watching episodes as long as the marginal: a.)benefit of watching another episode is positive. b.)benefit of watching another episode exceeds the marginal cost. c.)benefit of watching another episode is less than the marginal cost. d.)cost of watching another episode is positive.

b.)benefit of watching another episode exceeds the marginal cost.

The key to using the cost-benefit principle is to think about _____ aspects of a decision. a.)neither financial nor nonfinancial b.)both financial and nonfinancial c.)only financial d.)only nonfinancial

b.)both financial and nonfinancial

The interdependence principle: a.)implies that consumers depend on each other to make purchase decisions in the market. b.)implies that buyers decisions are affected by many factors other than the price of an item. c.)refers to the marginal benefit of consuming additional units of an item. d.)is the same as the cost-benefit principle.

b.)implies that buyers decisions are affected by many factors other than the price of an item.

Diminishing marginal benefit: a.)is when buying an additional item yields a larger marginal benefit than the previous item. b.)is when buying an additional item yields a smaller marginal benefit than the previous item. c.)is not important in determining a consumer's purchase decision. d.)is when consumers do not follow the rational rule.

b.)is when buying an additional item yields a smaller marginal benefit than the previous item.

A rational buyer will: a.)buy the product only when the marginal benefit of consuming the product is twice as much as the price of the product. b.)keep buying a product until marginal benefit equals price. c.)not consider costs versus benefits when purchasing a product. d.)buy a product until the marginal benefit of consuming the product is less than the price of the product.

b.)keep buying a product until marginal benefit equals price.