Question 1

Comparative advantage is based on opportunity costs.

Accepted Answer

Comparative advantage refers to the ability of a country to produce a good or service at a lower opportunity cost than another country. In other words, a country should specialize in producing the good or service in which it has a lower opportunity cost and trade with other countries in order to increase overall welfare. Therefore, comparative advantage is based on opportunity costs.

Question 2

The opportunity cost of an activity is best measured

Accepted Answer

Opportunity cost is the value of the best alternative forgone when making a decision. It is not just the monetary costs, but also the value expected from the best alternative that is forgone. Choice D correctly identifies this as the best way to measure opportunity cost.

Question 3

A test was scheduled for Monday morning, but you went to a party on Saturday night.If you hadn't attended the party, you could have studied for the test or gone to a movie.Which of the following is true?

Accepted Answer

The answer of A test was scheduled for Monday morning,...

Question 4

The opportunity cost of a particular activity

Accepted Answer

Opportunity cost varies from person to person because it depends on the value of the next best alternative that each individual foregoes, which can differ based on personal preferences and circumstances.

Question 5

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home.Which of the following is the most likely explanation for her behavior?

Accepted Answer

The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-priced restaurant, considering the time and distance involved in traveling to the cheaper option.

Question 6

If you enjoy playing golf, the opportunity cost of cleaning your room

Accepted Answer

The opportunity cost of cleaning your room is greater on sunny days because you are giving up the chance to play golf, which is more enjoyable in good weather.

Question 7

Suppose you have purchased a non-refundable plane ticket and, at the last moment, you cannot take the trip.You can, however, sell the ticket.If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?

Accepted Answer

The $700 is a sunk cost, meaning it cannot be recovered. The minimum you should accept is $30 to cover the additional costs of sending the ticket.

Question 8

It is possible for one person to have a comparative advantage in the production of all products?

Accepted Answer

It is not possible for one person to have a comparative advantage in the production of all products because comparative advantage arises from differences in opportunity costs between two individuals or groups. Since opportunity costs differ among individuals and products, it is not possible for one person to have an absolute advantage in the production of all products.

Question 9

Comparative advantage is

Accepted Answer

Comparative advantage refers to the ability of an individual or a country to produce a good at a lower opportunity cost than another individual or country. This means that they can produce the good at a lower cost in terms of other goods that they could have produced instead. It is different from absolute advantage, which simply refers to the ability of an individual or country to produce more of a good than another individual or country. Option A refers to absolute advantage, while options B, D, and E do not accurately define comparative advantage.

Question 10

The law of comparative advantage says that

Accepted Answer

The law of comparative advantage states that the individual with the lowest opportunity cost of producing a particular good should produce it. This means that even if one person has an absolute advantage in producing both goods, they will still benefit from trade if they specialize in the good that they have a lower opportunity cost for producing. Therefore, option B, C, D, and E are incorrect.

Question 11

Opportunity cost is objective; therefore, its value does not change as circumstances change.

Accepted Answer

Opportunity cost can be subjective and vary depending on the individual and the context. It can also change as circumstances, priorities, and options change.

Question 12

The law of comparative advantage says that a person should produce a good if she

Accepted Answer

The law of comparative advantage states that a person should produce a good if she has the lowest opportunity cost of producing that good. This means that the person can produce the good at a lower cost (in terms of other goods that could have been produced instead) than anyone else, making it more efficient for her to produce it.

Question 13

The law of comparative advantage states that the person who should produce a good is the person who

Accepted Answer

The law of comparative advantage states that the person who should produce a good is the person who has the lowest opportunity cost of producing that good. Opportunity cost is the cost of giving up one alternative for another. Therefore, the person who can produce a good with the lowest cost, in terms of what they have to give up in order to produce it, should produce it.

Question 14

A university should not disband its football team if it has already paid for the stadium.

Accepted Answer

The decision to disband a football team should consider various factors beyond just financial investments, such as the team's performance, student interest, and overall impact on the university community.

Question 15

Sunk costs

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered. They should not influence current decision-making because they do not change regardless of the outcome of the decision.

Question 16

If people specialize in producing those goods for which they possess a comparative advantage, then the economy as a whole can produce a greater quantity of goods.

Accepted Answer

This is the principle of comparative advantage theory in economics. Specialization allows individuals or businesses to produce goods more efficiently and at a lower opportunity cost, leading to increased productivity and overall economic growth.

Question 17

Which economic concept does the expression "time is money" reflect?

Accepted Answer

The expression "time is money" reflects the concept of opportunity cost, which suggests that the value of a resource is measured by the opportunities it foregoes. In this case, time spent on one activity means less time available to earn money elsewhere, so time can be considered a cost equivalent to money.

Question 18

Which economic concept does the expression "there's no such thing as a free lunch" reflect?

Accepted Answer

The expression "there's no such thing as a free lunch" means that everything has a cost, and even things that seem free have an opportunity cost. In other words, even if something is given to us for "free", there is still a cost to producing it or providing it, and that cost must be borne by someone. This reflects the economic concept of opportunity cost, which is the cost of the next best alternative that must be forgone in order to pursue a certain action.

Question 19

The term opportunity cost suggests that

Accepted Answer

Opportunity cost refers to the fact that because resources are limited (i.e. goods are scarce), choosing to use them in one way means forgoing the next best alternative use of those resources. This means that in order to obtain something, you must give up something else in return - this is the opportunity cost. Therefore, option E is the correct answer.

Question 20

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that

Accepted Answer

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that we are both at least as well off as we were before. This is because we would not have agreed to the exchange if we did not believe that we were getting a fair deal.

Quiz 2: Economic Tools and Economics Systems