principle of microeconomics

Opportunity cost can best be defined as the a. value of what must be given up in order to acquire an item. b. money cost to the buyer to acquire a good or service. c. total value of all the other items that otherwise could be acquired. d. cost to the seller to produce an item. e. time cost to obtain the money to buy an item.

Rational choice requires that opportunity cost be a. ignored in making a decision. b. considered for individual choices, but not for societal choices. c. computed, but not actually used in making a decision. d. considered as part of making a decision. e. used as the sole decision criterion.

To an economist, the cost of a college education a. includes the income that the student could have earned during the time spent in college. b. can be measured solely by the dollar cost of tuition, books, and other fees. c. includes only the cost of schooling, not the cost of housing and food. d. excludes financial aid in computation of the cost of schooling. e. All of the above are correct.

Which person has the highest opportunity cost of obtaining a college degree (assuming that attending college requires giving up his or her current position)? a. Bill, who is unemployed. b. Jane, who is an unwed mother and earns $15,000 a year. c. Larry, who is a technician in the Navy earning $18,000 a year with free food and housing. d. Mary, who has a job earning $60,000 a year as a computer programmer. e. Unable to determine from the data given.

Some college students think that because a college degree greatly increases their earning potential there is no opportunity cost of attending college. How would an economist look at the matter? a. There is no opportunity cost, assuming that future earnings actually increase as expected. b. The opportunity cost is much less than it would appear, assuming that earnings increase. c. Opportunity cost is a meaningless concept in this situation. d. The college students are completely correct in all respects. e. There is still an opportunity cost, even if it is justified by higher future earnings

Consider the following information regarding a person's decision to go to college: college tuition is $20,000 per year, room and board is $10,000 per year, and books and materials are $2,000 per year. Suppose that instead of going to college this person could have earned $18,000 working in a store. An economist would calculate the cost of going to college as a. $20,000. b. $30,000. c. $32,000. d. $50,000. e. $18,000.

The term opportunity cost refers to the a. value of what is gained when a choice is made. b. difference between the value of what is gained and the value of what is forgone when a choice is made. c. value of what is forgone when a choice is made. d. direct costs involved in making a choice.

Which of the following is an example of an externality? a. Drug abuse affecting David's health. b. Sara taking a break from work. c. A transaction between two parties, affecting them alone. d. Tom's smoking affecting his roommate's health.

Which of the following is an example of a fiscal policy initiative? a. Lowering of interest rates. b. Increase in reserve requirements. c. Reduction in taxes. d. Decrease in money supply.

The opportunity cost to you of an action is a. how much you must pay for the opportunity to take the action. b. the value to you of the next best action you could have taken. c. the cost to society of giving you the opportunity to take the action. d. the dollar cost to you of the action.

Opportunity cost is the a. cost incurred when one fails to take advantage of an opportunity. b. cost incurred in order to increase the availability of attractive opportunities. c. cost of the best option forgone as a result of choosing an alternative. d. drudgery of the undesirable aspects of an option.

During a war, a government will often draft people, most of whom are presently employed, into the army. An economist, computing the real cost of the war, would be sure to include which of the following items? a. the value of the civilian goods no longer produced by the new soldiers b. the cost of feeding and clothing the new soldiers c. the dollar cost of the payroll d. the higher prices of civilian goods due to wartime shortages e. the cost of transporting the soldiers to combat

The opportunity cost of any good or service is the a. actual dollar cost of doing or making it. b. highest price that a seller can get for the item. c. value of the next best alternative. d. cost associated with a value judgment. e. cost of producing the good or service.

Throughout the 1980s, accounting departments in U.S. universities were unable to fill many available faculty positions. This fact suggests that the salaries offered by these departments a. suffered from the cost disease of the service sector. b. were below the market price for qualified accountants. c. created externalities. d. failed to reflect productivity growth in teaching.

The principle of comparative advantage explains how a. one nation can take advantage of another one through international trade. b. two nations may engage in mutually beneficial trade, even though one of them is more productive than the other. c. one individual can take advantage of another through international trade. d. some people are good at producing everything, while others have no comparative advantages. e. some nations end up with large trade surpluses.