Question 1

Dorm rooms usually are not allocated by markets. Allocating dorm rooms is:

Accepted Answer

Allocating dorm rooms involves deciding how to distribute limited resources (rooms) among students, which is a fundamental economic problem of resource allocation.

Question 2

People can reasonably expect that an economic system will decide all of the following except:

Accepted Answer

An economic system typically addresses what goods to produce, how to produce them, and for whom they are produced, but the assignment of initial property rights is usually determined by legal or political systems, not the economic system itself.

Question 3

Which of the following is not one of the three central coordination problems of the economy given in the book?

Accepted Answer

B

Question 4

The opportunity cost of undertaking an activity includes any sunk cost.

Accepted Answer

Sunk costs are costs that have already been incurred and cannot be recovered, and thus should not be considered in the opportunity cost of undertaking an activity. Opportunity cost considers only the potential benefits lost from not choosing the next best alternative.

Question 5

According to the text, economics is the study of how:

Accepted Answer

Economics is fundamentally about how human beings coordinate their wants and desires, given the scarcity of resources.

Question 6

Scarcity exists because:

Accepted Answer

Scarcity exists because human wants are unlimited while resources to meet these wants are limited, leading to a situation where not all wants can be satisfied.

Question 7

Scarcity exists because economies cannot produce enough to meet the perceived desires of all individuals.

Accepted Answer

Scarcity arises because resources are limited while human wants are unlimited, leading to the inability to satisfy all desires fully.

Question 8

Economic systems:

Accepted Answer

The answer of Economic systems:
...

Question 9

Macroeconomics is the study of how individual choices are affected by economic forces.

Accepted Answer

Macroeconomics is the study of the economy as a whole, focusing on large-scale economic factors such as national productivity, inflation, and unemployment, rather than individual choices.

Question 10

The "invisible hand" is the price mechanism that guides people's actions in the market.

Accepted Answer

The "invisible hand," a concept introduced by Adam Smith, refers to the self-regulating nature of the marketplace where individual self-interest and competition lead to economic prosperity, often interpreted as the price mechanism guiding actions.

Question 11

The answers to an economy's three central economic problems are determined by the interaction of three forces: economic forces, political forces, and social forces.

Accepted Answer

The three central economic problems (what to produce, how to produce, and for whom to produce) are influenced by economic forces (like supply and demand), political forces (such as government policies), and social forces (including cultural norms and societal values).

Question 12

The economic decision rule is to undertake an action only when the marginal benefits of that action are greater than its total costs.

Accepted Answer

The economic decision rule is to undertake an action when the marginal benefits exceed the marginal costs, not the total costs.

Question 13

If allocating dorm rooms changes from allocation by lottery to allocation by the market:

Accepted Answer

The allocation of resources, whether by lottery or market, is inherently an economic problem because it involves deciding how limited resources (dorm rooms) are distributed among competing uses.

Question 14

Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from a 75 to a 100. She also determines that this improvement is worth $20. To study for an hour for her economics quiz, however, she will have to work one fewer hour at her part-time job. Alexandra should:

Accepted Answer

If the value of improving her grade is $20, she should study as long as her hourly wage is less than $20, as the benefit of studying outweighs the cost of not working.

Question 15

The quantity of goods and services available to society:

Accepted Answer

The quantity of goods and services available to society depends on human action, such as production, resource allocation, and technological advancement.

Question 16

Only marginal costs, not sunk costs, affect economic decisions if individuals are rational.

Accepted Answer

Marginal costs are relevant for decision-making because they represent the additional cost of producing one more unit, while sunk costs are past costs that cannot be recovered and should not influence current decisions.

Question 17

To engage in economic reasoning, one must compare:

Accepted Answer

Economic reasoning involves comparing the additional (marginal) costs and benefits of a decision to determine the best course of action.

Question 18

Say a pill existed that made people selfless. After taking it they were only interested in others, not themselves. Under the coordination definition of economics:

Accepted Answer

The coordination definition of economics focuses on how resources are allocated to meet the needs and wants of individuals. Even if people were selfless, resources would still be limited, and decisions would need to be made about how to allocate them efficiently, thus an economic problem would still exist.

Question 19

Deciding what the distribution of income should be is an example of normative economics.

Accepted Answer

Normative economics involves value judgments and opinions about what the economy should be like or what particular policy actions should be recommended, such as deciding the distribution of income.

Question 20

Social and political forces affect the way in which the invisible hand works.

Accepted Answer

Social and political forces can influence market dynamics, regulations, and consumer behavior, thereby affecting how the invisible hand operates in guiding economic outcomes.

Quiz 1: Economics and Economic Reasoning