Question 1

To help unscramble cause and effect,economists
A)use the concept of opportunity costs.
B)must use the ceteris paribus assumption.
C)answer the "what" question.
D)answer the "how" question.
E)must use normative statements.

Accepted Answer

The ceteris paribus assumption means that all other variables are held constant, allowing economists to isolate the variables being studied and determine cause and effect relationships.

Question 2

John decides to leave college early and play professional sports.Which of the following economic principles does John use?
I.personal economic policies
Ii.marginal cost versus marginal benefit analysis
Iii.normative versus positive economics
A)i and ii
B)i,ii and iii
C)ii only
D)i and iii
E)ii and iii

Accepted Answer

The answer of John decides to leave college early and...

Question 3

Suppose you decide to attend summer school and that this is considered a rational choice.When making this choice,
A)you must ignore the problem of scarcity.
B)you considered the marginal cost and marginal benefit of your choice.
C)you have used the ceteris paribus assumption.
D)you have made a positive statement.
E)you must have considered the social interest.

Accepted Answer

When making the choice to attend summer school, one must consider the marginal cost (tuition, time, etc.) and the marginal benefit (boosting GPA, potentially graduating earlier, etc.). This is a rational decision-making process based on weighing the costs and benefits of the decision. Therefore, choice B is the best answer.

Question 4

Kevin is re-finishing an antique grandfather clock that he purchased at a flea market for $300.He expects to be able to sell the clock for $450.At the last minute,Kevin discovers that he needs to repair the gears at a cost of $175 to make the clock worth $450 to potential buyers.It turns out that he could also sell the clock now,without completing the additional repairs,for $250.What should Kevin do?
A)He should sell the clock now for $250.
B)He should keep the clock but not make the repairs since the original $300 is a sunk cost.
C)He should complete the additional repairs and sell the clock for $450.
D)He should keep the clock after making the repairs since it is not rational to spend a total of $475 on an item that can only be sold for $450.
E)Kevin is indifferent between selling the clock as is or selling it after completing the repairs.

Accepted Answer

Kevin should complete the additional repairs and sell the clock for $450. Even though he will have to spend $175 on repairs, he will still make a profit of $125 ($450 - $175 - $300) which is more than the $50 profit he would make by selling it as is now. Furthermore, since he purchased the clock for $300, that cost is now a sunk cost and should not factor into his decision making. Thus, completing the repairs and selling the clock for the highest possible price is the best choice.

Question 5

Gregory is considering attending a concert with a ticket price of $40.He estimates that the cost of driving to the concert and parking there will add an additional $20.In order to attend the concert,Gregory will have to take time off from his part-time job.He estimates that he will lose 5 hours at work,at a wage of $8 per hour.Gregory's opportunity cost of attending the concert equals
A)$80.
B)$100.
C)$40.
D)$60.
E)$20.

Accepted Answer

Gregory's opportunity cost includes not only the direct costs of attending the concert ($40 ticket + $20 transportation), but also the lost wages from taking time off work (5 hours * $8 per hour = $40). Therefore, the total opportunity cost is $40 + $20 + $40 = $100.

Question 6

-In the figure above,what is the slope of the curve at point A?
A)0.75
B)-0.75
C)1.33
D)-1.33
E)zero

Accepted Answer

The slope of a curve at a given point can be found by taking the derivative of the curve's equation at that point. Without the specific equation or figure, we can't calculate the exact slope. However, if a curve is descending from left to right at a particular point, the slope at that point is negative. Thus, among the given options, -0.75 is a plausible negative slope.

Question 7

What do economists mean when they discuss "scarcity"?

Accepted Answer

The answer of What do economists mean when they discuss...

Question 8

Wichita is building a convention center and financing it with revenues raised from a city hotel tax.Local politicians assert that the convention center is essentially free for Wichita residents because out-of-town visitors are paying for it.Someone who is practicing the economic way of thinking would disagree because
A)they believe that Wichita does not need a new convention center.
B)there are other projects that could be undertaken with the tax funds.
C)the convention center may not pass a marginal cost-benefit test.
D)the hotel tax may lead to a decline in visits to Wichita.
E)the hotel tax may reduce commercial property values in the area.

Accepted Answer

The answer of Wichita is building a convention center and...

Question 9

Why do economists say that even very rich people face scarcity?

Accepted Answer

The answer of Why do economists say that even very...

Question 10

Which of the following is true regarding this statement? "The president's decision to spend more money on national defense is smart."
A)This is a normative statement.
B)The federal government does not face scarcity.
C)This topic would be studied in microeconomics.
D)Social interest must always be more important than self-interest.
E)Ceteris paribus does not apply to the government.

Accepted Answer

The statement is expressing a value judgment, which is the definition of a normative statement.

Question 11

Which of the following scenarios describes an action that is not rational from an economic point of view?
A)After drinking one martini (shaken,not stirred),James buys and drinks a second martini even though the marginal benefit of the second martini is lower than the marginal benefit of the first.
B)Eric buys a replacement ticket to the basketball game after he realizes that he accidentally left his original ticket at home.
C)Emily chooses to attend a social event on Tuesday night instead of studying even though she has an important exam on Wednesday morning.
D)US Airways sells a last minute ticket to Don for $50 even though its average cost per passenger is $250.
E)None of the above

Accepted Answer

Each scenario described involves individuals or entities making decisions based on their subjective valuation of benefits and costs at the moment, which can be rational from their perspective, even if it might not seem so from an outside view.

Question 12

Because resources are scarce,economists would say that
A)the best things in life are always free.
B)people's wants are unlimited.
C)every choice has an opportunity cost.
D)anything worth doing is worth doing well.
E)there are no benefits from cooperation.

Accepted Answer

Scarcity means that we cannot have everything we want, so we must make choices. Every choice we make has an opportunity cost, which is the value of the best alternative that we give up. Therefore, option C is the most appropriate choice. Option A is incorrect because not all the best things in life are free; some of them come at a cost. Option B is partially true, but it does not recognize the scarcity of resources, which is essential in economics. Option D and E may be true in some cases, but they are not related to the concept of scarcity or economics.

Question 13

What is the relationship between wants,resources,scarcity,and choices? Discuss the relationship for an individual and for a society.

Accepted Answer

The answer of What is the relationship between wants,resources,scarcity,and choices?...

Question 14

In New York City,Mayor Michael Bloomberg has recently recommend that the city,with the help of private donors,make cash payments to poor and underprivileged parents who can certify that their children are attending school on a regular basis.The payments would start after third grade and go through high school,rising each year as dropout rates get higher and a child's forgone earning potential is higher.What economic concept does this policy represent?
A)public goods
B)technological progress
C)externalities
D)the "invisible hand"
E)incentives

Accepted Answer

This policy represents the use of incentives to encourage parents to ensure that their children attend school regularly. The cash payments serve as a motivation or reward for this behavior.

Question 15

Suppose that your public library charges a fixed monthly membership fee of $12.Members are allowed to check out as many books as they want under this plan.The average member checks out 4 books per month.Suppose that your public library changes its policy.Now each book costs $3 to check out but there is no longer a monthly membership fee.What effect do you think the new policy will have on the total number of books checked out from your library each month? The new policy is likely to ______the number of books checked out because ________.
A)leave unchanged;members have already shown that they are willing to pay $12 to check out 4 books per month
B)leave unchanged;the average cost of the library service is the same under both plans
C)reduce;the marginal benefit of checking out books is now lower under the new policy
D)reduce;the marginal cost of checking out books is now higher under the new policy
E)increase;the average benefit of checking out more than 4 books is now higher under the new policy

Accepted Answer

The answer of Suppose that your public library charges a...

Question 16

Which of the following is true?
I.A rational choice is made on the margin.
Ii.Microeconomics is the study of the national economy while macroeconomics is the study of the global economy.
Iii.Economists try to understand how the economic world works by testing normative statements.
A)only i
B)i and iii
C)only ii
D)only iii
E)i and ii

Accepted Answer

Only statement I is true. Rational choice theory states that individuals make decisions based on the marginal benefits and costs of each additional unit of a good or service. Statement II is false as microeconomics is the study of individual behavior, firms, and markets while macroeconomics is the study of the overall economy of countries or the world. Statement III is also false as economists try to understand how the economic world works by testing positive statements, or statements that can be proven or disproven through empirical evidence.

Question 17

Which of the following is true regarding a normative statement?
I.It uses the ceteris paribus assumption.
Ii.It is a value judgment.
Iii.It accounts for opportunity costs.
A)i and iii
B)ii and iii
C)i only
D)ii only
E)i,ii,and iii

Accepted Answer

A normative statement is a value judgment or opinion about what should happen. It does not use the ceteris paribus assumption, which is used in positive statements to hold everything else constant. Normative statements may or may not account for opportunity costs, but this is not a defining characteristic of a normative statement. Therefore, only statement ii is true regarding a normative statement.

Question 18

Nathan drinks three cups of coffee per day.The marginal benefit that he enjoys from drinking the third cup is
A)less than the marginal benefit that he receives from drinking the second cup.
B)the same as the total benefit from drinking all three cups minus the total benefit of drinking the first two cups.
C)greater than the marginal benefit that he receives from drinking the second cup.
D)both A and B
E)none of the above

Accepted Answer

The marginal benefit of the third cup is the additional benefit from consuming that cup, which is typically less than the benefit from the second cup due to diminishing marginal utility. It is also calculated as the total benefit of three cups minus the total benefit of two cups.

Question 19

Which of the following is true?
I.A rational choice is always made in the pursuit of social interest.
Ii.Economics is a social science.
Iii.Economists try to understand how the economic world works by testing positive statements.
A)ii and iii
B)only i
C)only ii
D)only iii
E)i and ii

Accepted Answer

ii. Economics is indeed a social science that studies how individuals, governments, firms, and nations make choices on allocating resources to satisfy their wants and needs. iii. Economists use positive statements, which are objective and fact-based, to understand and explain the economic world through testing and observation.

Question 20

Will,Bill,and Phil decide to study an extra hour for an exam.Instead of studying,they could have gone out to eat,played football,or watched TV.Which of the following statements is correct?
A)The benefit the three students receive must be the same because they all make the same choice.
B)The students made a rational choice as long as they face no scarcity.
C)The students could each have different opportunity costs.
D)The marginal cost of the decision is the same if they make the same score on the exam.
E)Going out to eat,playing football,and watching TV are all called sunk costs.

Accepted Answer

Each student may have different opportunity costs, meaning that each individual may have a different best alternative option to studying for the exam. For example, Will may have a part-time job and is giving up additional wages by studying, while Phil may not have any other commitments and therefore has a lower opportunity cost for studying. As a result, each student may have a different best choice.

Quiz 1: Getting Started

To help unscramble cause and effect,economists

John decides to leave college early and play professional sports.Which of the following economic principles does John use? I.personal economic policies Ii.marginal cost versus marginal benefit analysis Iii.normative versus positive economics

Suppose you decide to attend summer school and that this is considered a rational choice.When making this choice,

-In the figure above,what is the slope of the curve at point A?

What do economists mean when they discuss "scarcity"?

Why do economists say that even very rich people face scarcity?

Which of the following is true regarding this statement? "The president's decision to spend more money on national defense is smart."

Which of the following scenarios describes an action that is not rational from an economic point of view?

Because resources are scarce,economists would say that

What is the relationship between wants,resources,scarcity,and choices? Discuss the relationship for an individual and for a society.

Which of the following is true? I.A rational choice is made on the margin. Ii.Microeconomics is the study of the national economy while macroeconomics is the study of the global economy. Iii.Economists try to understand how the economic world works by testing normative statements.

Which of the following is true regarding a normative statement? I.It uses the ceteris paribus assumption. Ii.It is a value judgment. Iii.It accounts for opportunity costs.

Nathan drinks three cups of coffee per day.The marginal benefit that he enjoys from drinking the third cup is

Which of the following is true? I.A rational choice is always made in the pursuit of social interest. Ii.Economics is a social science. Iii.Economists try to understand how the economic world works by testing positive statements.

Will,Bill,and Phil decide to study an extra hour for an exam.Instead of studying,they could have gone out to eat,played football,or watched TV.Which of the following statements is correct?