question

The opportunity cost of an action is equal to:

answer

the highest valued opportunity that must be sacrificed in order to take the action.

question

A student has a chance to see Green Day in concert. The student also has a major economics exam in the morning. If the student goes to the concert: A. she may receive a lower grade on the economics exam. B. the opportunity cost of the concert is the value of the time spent studying. C. the decision involves a trade-off.

answer

she may receive a lower grade on the economics exam. the opportunity cost of the concert is the value of the time spent studying. the decision involves a trade-off. ALL OF THE ABOVE

question

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a date. This offer will likely:

answer

increase the opportunity cost of going on the date.

question

Marginal thinking is best demonstrated by:

answer

choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

question

Marginal analysis involves:

answer

comparing the additional benefit from an action to the additional cost.

question

If a student enrolls in an additional course at the university, an economist would conclude that:

answer

the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

question

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000. The price of the new sport utility vehicle is $22,000.

answer

You will not purchase the new sport utility vehicle at this time if you are acting rationally.

question

The marginal benefit to you of drinking bottled iced tea is $1.50. The price of a bottle of iced tea is $1.25.

answer

If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.

question

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00. The marginal cost of buying a second gallon of milk:

answer

equals $2.00.

question

You lose $20 from your wallet and decide to miss an hour from work in order to search for it. To an economist, this means that:

answer

in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage.

question

Some political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent. The economic way of thinking indicates that legislation of this type would:

answer

reduce the after-tax cost of raising children and therefore increase the birth rate.

question

Which of the following policies would be most effective in promoting monthly water conservation?

answer

A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons

question

Which of the following statements is most consistent with the rule of rational choice?

answer

When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."

question

An individual has a comparative advantage in production if that individual:

answer

can produce at the lowest opportunity cost.

question

When a person possesses a comparative advantage in the production of one good or service, it:

answer

permits gains from trade to be realized due to a more efficient use of resources.

question

Resources and goods are free to move across state lines. If Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that:

answer

California has a comparative advantage in producing almonds. Oregon has a comparative advantage in producing honey. the opportunity cost of growing almonds is lower in California than in Oregon. the opportunity cost of producing honey is lower in Oregon than in California. E. all of the above are true.

question

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

answer

export; import

question

A downward sloping straight-line production possibilities curve implies:

answer

a constant opportunity cost.

question

Which of the following is true? A. By putting unemployed resources to work or by putting already employed resources to better uses, we could expand output in an economy. B. To generate increased economic growth, a society would produce fewer consumer goods and more capital goods in the present. C. If the production possibility curve is concave from below (that is, bowed outward from the origin), it reflects increasing opportunity costs of producing additional amounts of a good. D. Increases in a society's output do not make scarcity disappear.

answer

ALL OF THE ABOVE

question

Which of the following is true with regard to production possibilities curves?

answer

Investing in capital goods will increase the future production capacity of an economy, so an economy that invests more now (consumes less now) will be able to produce, and therefore consume, more in the future.

question

The fact that some resources and skills cannot be easily adapted from their current uses to alternative uses is the basic reason for the law of

answer

increasing opportunity cost.

question

The private ownership of property and the use of the market system to direct and coordinate economic activity are most characteristic of:

answer

a market economy

question

In a market economy how do we determine who will get the goods and services that have been produced?

answer

Whoever can afford them

question

Which of the following is true? A. An advanced market economy would tend to use both labor intensive and capital intensive production methods. B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be. D. All of the above are true. E. Both b. and c. are true.

answer

B. An economy in which labor is relatively scarce would tend to use capital intensive production methods. C. An increase in the availability of labor relative to capital in an economy would tend to increase how labor intensive the production processes in that economy would be.

question

Which of the following is true? A. In the product markets, firms are buyers and households are sellers. B. In the factor markets, firms are sellers and households are buyers. C. Firms receive money payments from households for labor, land, capital, and entrepreneurship. D. All of the above are true. E. None of the above is true.

answer

NONE OF THE ABOVE`

question

Because of scarcity:

answer

we must sacrifice valuable alternatives to obtain more goods and services we desire

question

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

answer

the benefit to his grades from studying for an hour.

question

The opportunity cost of an item is:

answer

the highest valued alternative you give up to get that item.

question

The opportunity cost of going to college includes:

answer

both tuition and the value of the student's time.

question

Opportunity cost includes

answer

both monetary and non-monetary costs.

question

Economists believe that in regards to criminal behavior:

answer

those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs.

question

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

answer

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

question

Which of the following best defines rational behavior?

answer

undertaking activities whenever the marginal benefit exceeds the marginal cost

question

If people are self-interested,

answer

C. as their preferences for leisure time increase, they are likely to work less. D. as the wages they are offered increase, they are likely to work more.

question

Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

answer

As long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

question

Specialization is a way for:

answer

individuals to make the best use of resources by devoting themselves to one primary productive activity.

question

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

answer

comparative advantage in production.

question

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?

answer

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

question

A nation has a comparative advantage in the production of cars over another nation if:

answer

it can produce cars at a lower opportunity cost than the other country.

question

Mike is able to complete a tax return in two hours earning a fee of $100. As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour. His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour. Both individuals could benefit if

answer

Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed.

question

Which of the following is true? A. People specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. B. The primary reason people pursue their comparative advantage is their self-interest. C. One advantage of specialization is that workers acquire greater skill from repetition. D. If a person, a region, or a country can produce a good or service at a lower opportunity cost than others, we say that they have a comparative advantage in the production of that good or service.

answer

ALL OF THE ABOVE

question

Which of the following is true? A. Voluntary trades give both parties more in value than what they give up. B. Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage. C. People can gain by specializing in the production of the good in which they have a comparative advantage. D. Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization.

answer

all of the above

question

Which of the following is not true? A. Voluntary exchange is expected to be advantageous to both parties to the exchange. B. What one trader gains from a trade, the other must lose. C. If one party to a potential voluntary trade decides it does not advance his interests, he can veto the potential trade. D. The expectation of gain motivates people to engage in trade.

answer

What one trader gains from a trade, the other must lose.

question

Advantages of specialization do not include:

answer

reduced interdependence.

question

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. According to comparative advantage,

answer

Tom should kill more birds and fish less, then trade birds for fish.

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