Question 1

The proliferation of BitTorrent and other file sharing media have threatened the copyright system.Based on an understanding of incentives and opportunity cost,how are the decisions of musicians likely impacted?

Accepted Answer

With the threat of piracy and illegal downloads, the incentives for musicians to create and distribute their music are reduced. If they cannot make enough money from their music, many may choose to pursue alternative professions where they can earn a better living. This will lead to a decline in the number of musicians and the quality of the music produced.

Question 2

When an individual chooses to act,he or she is said to be motivated by

Accepted Answer

Individuals are often motivated by incentives, which can be positive (rewarding) or negative (penalizing). Scarcity and disincentives may also have an impact on motivation, but they are not as directly linked to an individual's decision to act. Indifference and ambivalence suggest a lack of motivation.

Question 3

Hassan enjoys lifting weights in his spare time,but his gain in strength has come to a plateau.He is considering giving up weight lifting altogether,unless he experiences significant gains in the near future.Hassan is seeking a ________ incentive.

Accepted Answer

Hassan is seeking a positive incentive, as he wants to gain something (significant gains in strength) from continuing to lift weights.

Question 4

Which of the following is an example of an unintended consequence?

Accepted Answer

The tax rebate on electric cars was intended to incentivize the purchase of eco-friendly vehicles. However, the unintended consequence was that households may increase their overall electricity consumption, ultimately negating the environmental benefits of the program.

Question 5

The presence of scarcity means that no choices come without

Accepted Answer

Scarcity means that there are limited resources to fulfill unlimited wants and needs. Therefore, every choice requires giving up something else. This is known as a trade-off.

Question 6

A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy.This is an example of what type of incentive?

Accepted Answer

The new tax on gasoline is a negative indirect incentive because it indirectly influences consumer behavior by making it more expensive to operate vehicles with lower fuel economy. This indirectly encourages consumers to purchase vehicles with better fuel economy.

Question 7

The concept of ________ explains that making one choice means an individual will not have the time,resources,or energy to do something else.

Accepted Answer

The answer of The concept of ________ explains that making...

Question 8

Clarice must choose between reading the next chapter in her economics textbook or streaming the next episode of her favorite show.In her experience,she does well on exams,but even better when she reads the textbook.If she chooses to watch the show,what can be said of incentives?

Accepted Answer

Adding a negative incentive, such as blocking access to streaming services, would likely result in Clarice choosing to read the textbook instead of watching the show. This suggests that incentives do play a role in Clarice's decision-making process. However, it is not necessarily true that positive incentives are always more effective than negative incentives, or vice versa. The specific situation and individual preferences play a significant role in determining which type of incentive is more effective. Additionally, it is possible that both marginal and non-marginal incentives could play a role in this example, as Clarice's decision may be influenced by a variety of factors such as her current workload, stress levels, and personal preferences.

Question 9

During a job search,individuals will sometimes accept the lower of two competing salary offers.What would best explain this decision?

Accepted Answer

The answer of During a job search,individuals will sometimes accept...

Question 10

A mother takes her daughter on an outing and promises her ice cream if she behaves.In addition,she warns her that if she misbehaves,she won't be allowed to play with her toys at home.The latter is an example of a(n)________ incentive and reinforces the efficacy of the ice cream,a(n)________ incentive.

Accepted Answer

The warning about not being allowed to play with toys is a negative incentive because it involves a punishment for misbehavior. The promise of ice cream is a positive incentive because it involves a reward for good behavior.

Question 11

What is NOT a possible opportunity cost of attending a four-year college following high school graduation?

Accepted Answer

Opportunity cost refers to the benefits an individual misses out on when choosing one alternative over another. The cost of tuition at a four-year college is not an opportunity cost of attending college; it is a direct cost. Opportunity costs are the experiences or earnings foregone by choosing to attend college, such as traveling, working full-time, vocational training, or savings from cheaper educational alternatives.

Question 12

The ________ system encourages innovation by creating a powerful financial reward for creativity.

Accepted Answer

Patents provide exclusive rights to inventors for a certain period of time, which encourages innovation by allowing inventors to reap the financial benefits of their creations.

Question 13

What is the opportunity cost of purchasing a college textbook?

Accepted Answer

The opportunity cost of purchasing a college textbook is the cost savings from not purchasing a book. This means that the money you spend on the textbook cannot be used for something else, such as savings or other expenses. Therefore, the best choice is option B.

Question 14

Corporate leadership sometimes waits until after presidential elections in order to make major business decisions.An economist would maintain that this is in anticipation of future

Accepted Answer

The answer of Corporate leadership sometimes waits until after presidential...

Question 15

Why do incentives matter to economists?

Accepted Answer

Incentives are at the core of understanding how people make decisions in the field of economics. They are the key to understanding why people behave in certain ways and how different economic systems operate. By studying incentives, economists can develop theories and models that help explain and predict economic behavior.

Question 16

Trade-offs occur in all of the following scenarios EXCEPT

Accepted Answer

The answer of Trade-offs occur in all of the following...

Question 17

Isaac has four potential jobs to consider,each with different salary offers.From highest to lowest,the salaries are: $47,500,$46,000,$45,000,and $42,000.Based on the information provided,if Isaac accepts the highest-paying position,what is his opportunity cost of this position?

Accepted Answer

The opportunity cost of choosing the highest-paying job is the next best alternative forgone, which is the second highest salary offer of $46,000.

Question 18

Laura leaves her job as an accountant,where she earns $80,000 per year,to start her own business.After the first year,her business earns a profit of $60,000.How would an economist describe the profitability of Laura's career change?

Accepted Answer

Economists consider both explicit and implicit costs. Laura's explicit profit from her business is $60,000, but she also has an implicit cost of $80,000, which is the forgone salary from her previous job. Therefore, her economic loss is $20,000 ($60,000 - $80,000).

Question 19

Dexter decides to buy a new smartphone and offset the cost by selling his old phone to one of his friends.His friend has no money and wants to barter for the old phone.Dexter's preference for the items offered is in this order: laser printer,television,headphones,and bicycle.If Dexter accepts the laser printer as payment,what is his opportunity cost of this exchange?

Accepted Answer

The opportunity cost is the value of the next best alternative forgone, which in this case is the television, the item Dexter would have chosen next if he didn't choose the laser printer.

Question 20

Which statement represents a rational application of opportunity cost?

Accepted Answer

Opportunity cost is the value of the next-best alternative when a decision is made; thus, for a choice to be rational, its value should be greater than or equal to the cost of the next-best alternative. This ensures that the chosen option provides at least as much value as the option forgone.

Quiz 1: Five Foundations of Economics