Question 1

Why is it less costly to attend college during a recession?

Accepted Answer

During a recession, there are fewer job opportunities, which means that the opportunity cost of attending college (i.e., the income forgone by not working) is lower. This can make college more affordable for some individuals. However, tuition rates may not necessarily be lower during a recession. Additionally, there is no evidence to support the claim that colleges give out better grades during recessions.

Question 2

The opportunity cost of committing a crime and spending 5 years in jail:

Accepted Answer

The opportunity cost of committing a crime and spending 5 years in jail is different for everyone depending on their employment status. For someone who is employed, the cost would include lost wages, loss of job security, and damage to reputation. However, for someone who is unemployed, the cost may not be as high as there is no potential loss of income. Therefore, the opportunity cost is higher for people who are employed than for the unemployed.

Question 3

You are given a ticket to a Bob Dylan concert with a face value of $50. You only value the ticket at $40, sell it to a friend for $40, and attend a U2 concert priced at $60. The opportunity cost of attending the U2 concert is:

Accepted Answer

The answer of You are given a ticket to a...

Question 4

A student at a party deciding whether to stay a few more minutes is:

Accepted Answer

The student is considering whether the marginal benefit of staying a few more minutes at the party outweighs the marginal cost of leaving, which involves thinking on the margin.

Question 5

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:

Accepted Answer

The answer of Susan quits her administrative job, which pays...

Question 6

Economists Jevons, Menger, and Walras are credited with:

Accepted Answer

Jevons, Menger, and Walras are credited with starting the "marginal revolution," which emphasized the importance of marginal analysis in economics and paved the way for modern microeconomics.

Question 7

What should happen to crime rates when the unemployment rate rises?

Accepted Answer

When the unemployment rate rises, people may resort to crime because their opportunity cost of committing crimes (i.e., getting a legitimate job) has decreased. Unemployment may also lead to an increase in poverty, which can be a cause of crime. Therefore, crime rates should rise when the unemployment rate increases. Choice A is incorrect because property crime rates are likely to increase since people may find it harder to make ends meet. Choice C is also incorrect because the opportunity cost of crime has fallen, not risen. Choice D is incorrect because trade-offs always exist.

Question 8

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

Accepted Answer

When jobs are hard to find, individuals may choose to go back to school instead of remaining unemployed or underemployed. The opportunity cost of going back to school is lower because the potential income from a job is low. Therefore, fluctuations in graduate school enrollment can be positively correlated with fluctuations in unemployment.

Question 9

In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:

Accepted Answer

The opportunity cost of an activity is the value of the next best alternative foregone. In this case, the next best alternative to chatting with friends is studying economics.

Question 10

In The Economics of Nonhuman Societies, economist Gordon Tullock describes the economics hidden in biology (e.g., ants and bees). One of the lessons of the book is opportunity cost. In what way does an animal, such as an ant, face opportunity costs?

Accepted Answer

An ant faces opportunity costs in the sense that searching for food in one direction means it cannot search in another direction. This is because its time and energy are limited, and it must allocate these resources wisely in order to maximize its chances of finding food and returning safely to the colony. Thus, the ant must weigh the potential benefits of searching in one direction against the potential benefits of searching in another direction, taking into account the cost of not searching in the other direction. This is a classic example of opportunity cost, in which the cost of one choice is the value of the next best alternative.

Question 11

Why might the FDA err on the side of "overtesting" pharmaceutical drugs compared with the level of testing that is economically efficient?

Accepted Answer

The FDA may err on the side of "overtesting" pharmaceutical drugs because dangerous side effects are more important than drug loss (due to extended testing times) and drug lag (due to delayed approval). Ensuring patient safety is the top priority, and minimizing risks of deadly side effects or unforeseen adverse reactions is crucial.

Question 12

Economists believe people make decisions by:

Accepted Answer

Economists commonly believe that people weigh the marginal costs and marginal benefits of their decisions, meaning they consider the additional costs and benefits gained from each additional unit of a product or service. This helps them make rational decisions that maximize their satisfaction or utility.

Question 13

On June 13, 2011, writer Sebastian Anthony at Extreme Tech wrote, "During the two days that the Les Paul [Google] doodle was online, those 740 million visitors spent 26 seconds more on the Google home page than normal. That's a total of almost 10.7 million man-hours spent playing with the Les Paul Google Doodle. Assuming the average Google user earns $25/hour, the doodle cost companies around the world $268 million in lost productivity." Mr. Anthony's mistake is overestimating opportunity costs. He is doing this by assuming that:

Accepted Answer

Mr. Anthony's mistake is assuming that all the time spent on the Google Doodle would have been spent working instead, which is an overestimation of opportunity costs. It is more likely that the visitors would have spent that time on other leisure activities or non-work-related tasks.

Question 14

When deciding whether or not to undertake an activity, economists compare:

Accepted Answer

Economists use the cost-benefit analysis approach to decision-making. This involves comparing the additional costs of an activity with the additional benefits received. By doing so, they can determine whether or not an activity is worth pursuing based on the net benefit it provides. A and B are incorrect because they do not take into account the incremental or marginal costs and benefits. D is incorrect because it compares the average cost to the total benefits, which is not an appropriate comparison.

Question 15

Air travel from Chicago to Los Angeles costs $800 and takes four hours. A bus ticket between the cities costs $100 and takes 104 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be:

Accepted Answer

The answer of Air travel from Chicago to Los Angeles...

Question 16

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of:

Accepted Answer

This is an example of marginal thinking, which involves comparing the additional benefits to the additional costs of some choice or action. By weighing the additional benefit of studying an extra hour against the additional cost (e.g. time, energy), the individual can make a more informed decision about whether or not to study longer.

Question 17

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using?

Accepted Answer

Stefan is using the concept of trade-offs, highlighting that Manuel is willing to give up some health benefits (by choosing ice cream over broccoli) in exchange for the enjoyment of eating something he likes. This shows that Manuel does not truly place an infinite value on his life, as he is willing to trade health for pleasure.

Question 18

What is thinking on the margin?

Accepted Answer

Thinking on the margin involves making choices by comparing the additional benefits and additional costs of doing a little bit more of some activity. This allows individuals to make rational decisions based on the incremental changes of their decisions rather than just the overall impact. Therefore, the best choice is D that correctly defines thinking on the margin.

Question 19

How is the unemployment rate related to the opportunity cost of college?

Accepted Answer

When unemployment is high, there are fewer job opportunities, so the opportunity cost of attending college (foregone wages) is lower.

Question 20

What is meant by the term "marginal revolution"?

Accepted Answer

The term "marginal revolution" refers to the development of marginal analysis in economic theory, which occurred in the late 19th century. This revolution led to a new understanding of how individuals make decisions at the margin, which has since become a cornerstone of modern economic theory.

Quiz 1: The Big Ideas