Question 1

Fact 1.3.1 Costs Soar for London Olympics
The regeneration of East London, the site of the 2012 Olympic Games, is set to add extra £1.5 billion to taxpayers' bill.
Source: The Times, London, July 6, 2006
Refer to Fact 1.3.1. The cost of regenerating East London ________ an opportunity cost of hosting the 2012 Olympic Games ________.

Accepted Answer

The regeneration of East London would not occur unless London hosted the 2012 Olympics.

Question 2

Which of the following creates an incentive to increase the amount of an activity?

Accepted Answer

A decrease in the marginal cost of the activity and an increase in the marginal benefit from the activity creates an incentive to increase the amount of the activity as the cost of the activity has decreased and the benefit gained from it has become greater. This creates a scenario where individuals or businesses would want to increase their engagement in the activity to gain more benefit from it.

Question 3

The night before a history test, you decide to go to the movies instead of reviewing your notes. You get 60 percent on your test compared with the 75 percent that you normally score. You ________ a tradeoff and the opportunity cost of your evening at the movies was ________.

Accepted Answer

The scenario describes a tradeoff between going to the movies and studying for the test, with the opportunity cost being the 15 percent fall in grade. Therefore, the correct answer is A, as the student faced the tradeoff and the opportunity cost was the 15 percent fall in grade.

Question 4

Which of the following is an example of a positive statement?

Accepted Answer

Positive statements are based on factual claims about how the world actually works, rather than how it should work. Option B, "Increasing the minimum wage results in more unemployment," is a positive statement because it makes a factual claim about the consequences of increasing the minimum wage.

Question 5

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares

Accepted Answer

Laura is making a decision at the margin, which means she is deciding whether to produce a few additional printers. Therefore, she needs to compare the extra revenue (which she will earn by selling the additional printers) to the extra cost (which she will incur by producing the additional printers). Option B compares the extra revenue to the extra cost, making it the best choice. Option A compares the total revenue to the total cost, which would be appropriate if Laura were considering whether to continue producing printers at all. Option C compares the extra revenue to the average cost, which is not relevant for a decision at the margin. Options D and E involve comparing HP's printers to those of competing companies, which is not relevant for the decision Laura is making.

Question 6

Statements about "what is" are called

Accepted Answer

Statements about "what is" are objective statements that describe the current state of things, without making any value judgments or recommendations. Therefore, they are known as positive statements.

Question 7

You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is

Accepted Answer

The answer of You have the choice of going on...

Question 8

Before starring as Tony Stark in Iron Man, Robert Downey Jr. had played in 45 movies that had average first-weekend box office revenues of a bit less than $5 million. Iron Man grossed $102 million in its first weekend. The success of Iron Man ________ the opportunity cost of hiring Robert Downey Jr. Movie producers now have ________ incentive to hire Robert Downey Jr.

Accepted Answer

The success of Iron Man increases the opportunity cost of hiring Robert Downey Jr. as he has now proven to be a valuable asset in generating high box office revenues. Movie producers now have more incentive to hire him in order to replicate the success of Iron Man.

Question 9

A positive statement is

Accepted Answer

A positive statement is a statement of fact or belief that can be verified, and it describes how the world is or functions. It is based on evidence and observation and is not influenced by personal opinion or values. Therefore, option D is the correct answer.

Question 10

Refer to Fact 1.3.2. The opportunity cost of the Sochi Olympics was

Accepted Answer

The opportunity cost of the Sochi Olympics was $51 billion if the Russian government would not have spent this money had the Olympics not been held in Sochi, as stated in Fact 1.3.2. This means that the money spent on the Olympics could have been used for other purposes, such as infrastructure improvements or social programs, if the Olympics had not been held in Sochi.

Question 11

Statements about "what ought to be" are called

Accepted Answer

Statements about "what ought to be" are normative statements, which involve value judgments and opinions about how things should be. Positive statements, on the other hand, involve objective facts about how things are. Economic statements can be either positive or normative, depending on whether they are describing the economy as it is or making recommendations about how it should function. Scientific statements are typically positive statements based on empirical evidence. Hypotheses are tentative explanations for observed phenomena and can be either positive or normative depending on their subject matter.

Question 12

A positive statement is

Accepted Answer

The answer of A positive statement is
...

Question 13

Which of the following statements is normative?

Accepted Answer

The statement "Scientists should not make normative statements" is a normative statement itself. It is expressing a value judgment about what scientists should or should not do.

Question 14

The scientific purpose of simplifying assumptions in an economic model is to

Accepted Answer

Simplifying assumptions are used in economic models to strip away complexities of the real world that are not relevant to the issue being studied. This helps researchers to focus on the key elements of the problem and develop a more precise understanding of the relationships between variables. Simplifications can help to make economic models more useful and practical, but they must be carefully chosen to avoid oversimplification and the risk of producing misleading results.

Question 15

"The rich should face higher income tax rates than the poor." This is an example of

Accepted Answer

This is a normative statement because it expresses an opinion about what should be done, rather than describing what currently exists (positive statement) or stating something as undesirable (negative statement). It is a matter of value judgment and opinion rather than facts or data.

Question 16

You have the choice to go skiing during spring break, staying at the university to study, or spending the week visiting your family. If you decide to go skiing, the opportunity cost of the holiday is

Accepted Answer

The opportunity cost of going skiing would be the option that you would have chosen instead, had you not gone skiing. In this case, the two options are staying at the university to study or visiting your family. Therefore, the opportunity cost is either staying at the university or visiting your family, depending on what you would have done otherwise.

Question 17

A university decides to change its late night bus service between the campus and student housing from a fare-based service to a free service. This statement means that the incentive to ride the bus ________ and the opportunity cost of a bus ride ________. The university's decision is a ________ decision.

Accepted Answer

The incentive to ride the bus changes because now it is free rather than having a fare-based system. Since the opportunity cost of a bus ride has decreased (it now costs $0), people are more likely to take advantage of it, so it decreases. This is a microeconomic decision because it only affects a specific area/campus rather than the entire economy.

Question 18

Complete the following sentence. Economic models

Accepted Answer

Economic models are simplified representations of the economic world that focus on specific aspects and include only the relevant features needed for the purpose at hand. They do not include all the details of the economic world, but rather provide a framework for analyzing economic behavior and making predictions.

Question 19

Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand C. The price of each product is $10. If Chanel decides to purchase Brand A, the opportunity cost of this decision is

Accepted Answer

The opportunity cost of choosing Brand A is the value of the highest-valued alternative forgone, which in this case is either Brand B or Brand C. Therefore, the best choice depends on which one Chanel considers to be the highest-valued alternative. If Chanel values Brand C more than Brand B, then the best choice would be to purchase Brand B. If Chanel values Brand B more than Brand C, then the best choice would be to purchase Brand C.

Question 20

A normative statement is

Accepted Answer

Normative statements express subjective opinions or judgments based on values, beliefs, and preferences about what one thinks should happen or what is desirable. They are not necessarily true or false, but rather reflect personal or societal goals or norms.

Quiz 1: What Is Economics

Which of the following creates an incentive to increase the amount of an activity?

The night before a history test, you decide to go to the movies instead of reviewing your notes. You get 60 percent on your test compared with the 75 percent that you normally score. You a tradeoff and the opportunity cost of your evening at the movies was .

Which of the following is an example of a positive statement?

Laura is a manager for HP. When Laura must decide whether to produce a few additional printers, she is choosing at the margin when she compares

Statements about "what is" are called

You have the choice of going on vacation to Florida for one week, staying at work for the week, or spending the week doing fix-up projects around your house. If you decide to go to Florida, the opportunity cost of the trip is

A positive statement is

Refer to Fact 1.3.2. The opportunity cost of the Sochi Olympics was

Statements about "what ought to be" are called

A positive statement is

Which of the following statements is normative?

The scientific purpose of simplifying assumptions in an economic model is to

"The rich should face higher income tax rates than the poor." This is an example of

You have the choice to go skiing during spring break, staying at the university to study, or spending the week visiting your family. If you decide to go skiing, the opportunity cost of the holiday is

A university decides to change its late night bus service between the campus and student housing from a fare-based service to a free service. This statement means that the incentive to ride the bus and the opportunity cost of a bus ride . The university's decision is a decision.

Complete the following sentence. Economic models

Chanel has the option of purchasing one of three products: Brand A, Brand B, or Brand C. The price of each product is $10. If Chanel decides to purchase Brand A, the opportunity cost of this decision is

A normative statement is