Question 1

Opportunity cost is the ________ alternative forfeited when a choice is made.

Accepted Answer

Opportunity cost is the highest-valued alternative forfeited when a choice is made. It refers to the value of the next best alternative that is forgone as a result of choosing a particular option. This means that the best choice is the one that maximizes the value of what is gained, while minimizing the value of what is given up. Therefore, option B is the best choice.

Question 2

What is the opportunity cost of taking this exam?

Accepted Answer

The opportunity cost is defined as the value of the best alternative that is given up. In this case, the opportunity cost of taking the exam is the highest valued alternative that you gave up to prepare for and attend the exam. This could be anything from spending time with family and friends, pursuing a hobby, or working at a job that pays more. Therefore, the best choice is C.

Question 3

If you don't like changing the oil in your car and pay your father to do it for you,you have provided him with a(n):

Accepted Answer

A direct incentive is a clear and straightforward motivation to perform a task, such as paying someone to change the oil in your car.

Question 4

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer.With what population would such a system be successful?

Accepted Answer

A population that is unwilling to take risks and believes there is a high chance of being caught would be more likely to comply with the honor system, as they would not want to face the consequences of being caught without a valid fare.

Question 5

Kelly is an architect,and she is trying to decide whether to hire Mike,a draftsman,to assist with her work.Kelly could hire Mike at $20 per hour,but it would take him three times as long to complete a task as it takes Kelly.Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle.Which of the following is true?

Accepted Answer

Kelly should hire Mike because even though it takes him longer, her opportunity cost of $90 per hour is higher than paying Mike $20 per hour, making it cost-effective for her to focus on higher-value tasks.

Question 6

The U.S.federal government offers homeowners a tax deduction for their home loan interest payments.This reduction in taxes may have encouraged too many people to own a home.If the tax deduction caused people who otherwise would have rented to own,the tax deduction serves as a(n):

Accepted Answer

The tax deduction for home loan interest payments may have indirectly incentivized people to own a home by making it more financially appealing compared to renting. This would make it an indirect incentive.

Question 7

What is the indirect incentive in the unemployment insurance program?

Accepted Answer

The answer of What is the indirect incentive in the...

Question 8

In the area of many college campuses,parking spaces are often scarce.If these parking spaces have parking meters,which population described below would pay for parking?

Accepted Answer

This population is unlikely to risk getting caught or receiving a parking ticket, and they place a high value on following rules and doing what is morally right. Therefore, they are the most likely to pay for parking at the meters.

Question 9

The government has been trying to encourage the use of fuel-efficient cars.One way it has been doing this has been by allowing fuel-efficient cars to use a separate highway lane.This encourages people to use fuel-efficient cars because:

Accepted Answer

By allowing fuel-efficient cars to use a separate highway lane, those who place a high value on their time may be encouraged to buy a fuel-efficient car to take advantage of the speedier lane, incentivizing them to use a more sustainable form of transportation.

Question 10

The government controls for many indirect incentives in safety net social programs by:

Accepted Answer

The answer of The government controls for many indirect incentives...

Question 11

The opportunity cost of a purchase is:

Accepted Answer

The opportunity cost refers to the value of the next best option foregone, which one gives up to buy or invest in something else. This means that the correct answer is D, "the alternative good or service that one sacrifices because a different good was purchased."

Question 12

A health insurance company may offer its policyholders a discount on their premiums if they prove that they have stopped smoking.What type of incentive is the health insurance company offering?

Accepted Answer

The health insurance company is directly incentivizing its policyholders by offering them a discount on premiums if they can demonstrate that they have stopped smoking. This is a clear and direct incentive for people to quit smoking, as it directly benefits them financially.

Question 13

Indirect incentives create:

Accepted Answer

Indirect incentives can have unintended consequences, meaning that the outcome may not have been anticipated or intended by those who created the incentive.

Question 14

In a growing number of cities,stores are required either not to make available plastic or paper bags or to do so only for an additional fee.If this fee can be refunded when you recycle the bag,the refund acts as a(n):

Accepted Answer

The refund acts as a direct incentive because it directly encourages people to recycle the bag by offering a financial benefit.

Question 15

Economics is concerned with the trade-offs that emerge because of scarcity.The term "trade-offs" refers to:

Accepted Answer

Trade-offs refer to the fact that when making a choice, something else must be given up. In economics, this refers to the fact that due to scarcity, resources must be allocated in a way that means some wants or needs cannot be met. Therefore, trade-offs must be made when choosing where to allocate resources.

Question 16

An opportunity cost:

Accepted Answer

An opportunity cost is the value of the next best alternative that is forgone in order to pursue a certain action or decision. It is not restricted to decisions involving money or time and is a fundamental concept in economics. It applies to the decisions made by individuals, businesses, and governments.

Question 17

An opportunity cost is the:

Accepted Answer

Opportunity cost is the cost of a purchase or decision as measured by what is given up. It is the value of the next best alternative forgone in order to pursue a certain action. It is not necessarily the lowest or highest cost, but rather the cost of what is foregone in the decision-making process.

Question 18

Rational decision-making under conditions of scarcity requires individuals to:

Accepted Answer

Rational decision-making under conditions of scarcity requires individuals to understand that trade-offs are necessary. This means that people must be willing to give up some things in order to have others, and they must prioritize their wants and needs based on their limited resources. While being aware of prices and seeking discounts may be helpful, it is not essential to rational decision-making. Placing a monetary value on everything and earning as much income as possible are also not necessary for making rational decisions under conditions of scarcity.

Question 19

While generous disability insurance can help those who have been permanently injured,it can also increase the likelihood that individuals will falsely claim to be disabled.This likelihood is a(n):

Accepted Answer

An indirect incentive is one that alters the costs or benefits of actions without affecting those costs or benefits directly. In this case, the generous disability insurance creates an indirect incentive for individuals to falsely claim to be disabled.

Question 20

The cost of a trade-off is known as the ________ of that decision.

Accepted Answer

The cost of a trade-off is known as the opportunity cost of that decision. The opportunity cost is the cost of the next best alternative that must be forgone in order to pursue a certain action. Therefore, the best choice is C, opportunity cost.

Quiz 1: The Five Foundations of Economics