Question 1

Economists Jevons, Menger, and Walras are credited with:

Accepted Answer

Jevons, Menger, and Walras are known for starting the "marginal revolution" in economics, which emphasized the significance of marginal analysis in understanding economic behavior and decision-making.

Question 2

In the 2 hours between classes a student can do one of three things, ranking them from most to least desirable as: (1) chat with friends, (2) study economics, or (3) eat lunch. This student's opportunity cost of chatting with friends is:

Accepted Answer

The opportunity cost of an action is the value of the next best alternative that is forgone. In this case, if the student chooses to chat with friends, they are giving up the opportunity to study economics or eat lunch. Since studying economics is the next best alternative, the opportunity cost of chatting with friends is the value of studying economics.

The best choice(s) depends on the student's preferences and priorities. If the student values socializing more than academic pursuits or hunger satisfaction, they might choose to chat with friends. However, if they prioritize their academic success or physical well-being, they might choose to study or eat lunch instead.  So, there is no single best choice without knowing the individual's preferences.

Question 3

What is thinking on the margin?

Accepted Answer

Thinking on the margin involves comparing the additional benefits and additional costs from doing a little bit more of some activity. This allows for a more precise and informed decision-making process. Therefore, the best choice is D.

Question 4

When deciding whether or not to undertake an activity, economists compare:

Accepted Answer

Economists use the principle of marginal analysis which compares the additional cost (marginal cost) of undertaking an activity with the additional benefit (marginal benefit) received from it. This helps in making efficient use of resources and making decisions that maximize benefits while minimizing costs. Therefore, option C is the correct answer.

Question 5

Susan quits her administrative job, which pays $40,000 a year, to finish her four-year college degree. Her annual college expenses are $8,000 for tuition, $900 for books, and $2,500 for food. The opportunity cost of attending college for the year is:

Accepted Answer

The answer of Susan quits her administrative job, which pays...

Question 6

The opportunity cost of committing a crime and spending 5 years in jail:

Accepted Answer

The opportunity cost of committing a crime and spending 5 years in jail is higher for people who are employed than for the unemployed because the employed individuals lose out on potential income and career advancement opportunities during their time in jail. The other choices are incorrect because the opportunity cost is not the same for everyone, it is not zero because the government spends money on jail, and it is not just equal to fines and legal fees.

Question 7

What should happen to crime rates when the unemployment rate rises?

Accepted Answer

When the unemployment rate rises, the opportunity cost of crime (i.e., getting a legitimate job) decreases, making it more attractive for individuals to engage in criminal behavior. Therefore, crime rates should rise when the unemployment rate increases.

Question 8

Why is it less costly to attend college during a recession?

Accepted Answer

During a recession, there are typically fewer job opportunities available, which means that the opportunity cost of attending college (i.e., the potential earnings from working instead of studying) is lower. Additionally, some colleges may offer financial aid or scholarships to attract and retain students during an economic downturn. However, tuition costs do not necessarily decrease during a recession, and there is no evidence to support the claim that colleges give out better grades during this time.

Question 9

In The Economics of Nonhuman Societies, economist Gordon Tullock describes the economics hidden in biology (e.g., ants and bees). One of the lessons of the book is opportunity cost. In what way does an animal, such as an ant, face opportunity costs?

Accepted Answer

Searching for food in one direction means an ant cannot search in another direction, which represents the opportunity cost. If an ant chooses to search for food in one direction, it must give up the opportunity to search for food in other directions. This highlights the importance of making strategic decisions based on the trade-offs and opportunity costs involved.

Question 10

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using?

Accepted Answer

Stefan is using the concept of trade-offs, which involves giving up one option in order to pursue another. In this scenario, Manuel is choosing to eat ice cream instead of healthier broccoli, which means he is giving up some potential health benefits in order to gain enjoyment from the ice cream. This illustrates the concept of trade-offs.

Question 11

A student at a party deciding whether to stay a few more minutes is:

Accepted Answer

The student is considering the marginal benefit of staying a few more minutes at the party and weighing it against the marginal cost of leaving now. This reflects thinking on the margin. The other options are not relevant to this scenario.

Question 12

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

Accepted Answer

When jobs are difficult to find, the opportunity cost of going to graduate school is low, meaning that the cost of foregoing potential earnings is not as high as it would be if job opportunities were plentiful. This means that more people may opt to pursue graduate education during times of high unemployment, leading to fluctuations in enrollment numbers that correlate with unemployment rates.

Question 13

What is meant by the term "marginal revolution"?

Accepted Answer

The term "marginal revolution" refers to the shift in economic thinking that occurred in the late 19th century when economists began to focus on the idea of marginal utility, or the additional satisfaction gained from consuming one more unit of a good or service. This change in thinking led to the development of marginal analysis as a tool for understanding economic behavior and the foundation of modern microeconomics.

Question 14

Economists believe people make decisions by:

Accepted Answer

Economists believe that people make rational decisions by comparing the additional benefits (marginal benefits) of one option against its additional costs (marginal costs). This means that people will only choose an option if its marginal benefit exceeds its marginal cost, and will continue choosing that option until marginal benefit equals marginal cost.

Question 15

Air travel from Chicago to Los Angeles costs $800 and takes four hours. A bus ticket between the cities costs $100 and takes 104 hours. Other things constant, the minimum value of one's time that would induce a rational individual to fly rather than drive would be:

Accepted Answer

The answer of Air travel from Chicago to Los Angeles...

Question 16

You are given a ticket to a Bob Dylan concert with a face value of $50. You only value the ticket at $40, sell it to a friend for $40, and attend a U2 concert priced at $60. The opportunity cost of attending the U2 concert is:

Accepted Answer

The answer of You are given a ticket to a...

Question 17

Why might the FDA err on the side of "overtesting" pharmaceutical drugs compared with the level of testing that is economically efficient?

Accepted Answer

The FDA has a responsibility to protect public health and safety, so they are likely to err on the side of caution and overtreat pharmaceutical drugs to ensure that dangerous side effects are minimized or eliminated. While drug lag and drug loss may be concerns for pharmaceutical companies, they are not as important as ensuring the safety and effectiveness of drugs for patients.

Question 18

On June 13, 2011, writer Sebastian Anthony at Extreme Tech wrote, "During the two days that the Les Paul [Google] doodle was online, those 740 million visitors spent 26 seconds more on the Google home page than normal. That's a total of almost 10.7 million man-hours spent playing with the Les Paul Google Doodle. Assuming the average Google user earns $25/hour, the doodle cost companies around the world $268 million in lost productivity." Mr. Anthony's mistake is overestimating opportunity costs. He is doing this by assuming that:

Accepted Answer

Mr. Anthony's mistake is assuming that all those man-hours spent playing with the Les Paul Google Doodle would have been spent working if not for the doodle. This is an overestimation of opportunity costs because people have a limited capacity for work and also need breaks and leisure time. It is unlikely that all 740 million visitors would have spent those 26 seconds working if they weren't playing with the doodle. Therefore, the estimate of lost productivity is overstated.

Question 19

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of:

Accepted Answer

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of marginal thinking, which means making decisions based on the incremental changes or additions. By considering the cost-benefit analysis of the added hour of study, the individual can decide whether it is worth investing their time in it.

Question 20

How is the unemployment rate related to the opportunity cost of college?

Accepted Answer

The answer of How is the unemployment rate related to...

Quiz 1: The Big Ideas