Question 1

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:
A) $1 plus the enjoyment you would have received from the candy bar.
B) $2 minus the enjoyment you received from the bag of chips.
C) $1.
D) the enjoyment you would have received from the candy bar.

Accepted Answer

The opportunity cost of choosing one option over another is the value of the opportunity lost. In this case, it's the enjoyment you would have received from the candy bar, since that's what you give up by choosing the bag of chips.

Question 2

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:
A) The real cost of something is what you must give up to get it.
B) "How much" is a decision at the margin.
C) People usually exploit opportunities to make themselves better off.
D) There are gains from trade.

Accepted Answer

This statement represents the economic concept of opportunity cost, which is the real cost of something in terms of what must be given up to obtain it. In this case, joining the economics club means giving up the opportunity to join the accounting club.

Question 3

The economic way of thinking entails:
A) the analysis of benefits but not costs.
B) the analysis of costs but not benefits.
C) making choices at the margin.
D) making the distinction between microeconomics and macroeconomics.

Accepted Answer

The economic way of thinking involves making decisions at the margin, which means weighing the benefits and costs of each additional unit of a good or service. This implies that both benefits and costs are analyzed in decision-making, so answers A and B are incorrect. While microeconomics and macroeconomics are important distinctions in the field of economics, they are not directly related to the economic way of thinking.

Question 4

The concept of the margin deals with:
A) making incremental choices.
B) all or none of something.
C) engaging in unethical activities.
D) making difficult choices.

Accepted Answer

The concept of the margin refers to making incremental choices, or making decisions based on small changes or differences. This can involve weighing options and making difficult choices in order to determine the best course of action. It does not necessarily involve engaging in unethical activities or choosing between all or none of something.

Question 5

Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study rather than tutor. Marla's choice indicates that she:
A) values an additional hour of studying more than the $10 she would earn tutoring.
B) values an hour of studying less than the $10 she would earn tutoring.
C) does not understand that there is no benefit from studying.
D) doesn't need the money.

Accepted Answer

Marla's decision shows that she values an additional hour of studying more than the $10 she would earn from tutoring.

Question 6

A friend comes up to you and offers you a free ticket to a professional baseball game that night. You decide to attend the game. The game takes five hours and costs you $15 for transportation. If you had not attended the game, you would have worked at your part-time job for $8 an hour. What is the cost to you of attending the game?
A) The cost is zero-the ticket is free.
B) $65
C) $40
D) $55

Accepted Answer

The game takes five hours, so if you had not attended, you could have worked and made $40 ($8/hour x 5 hours). Add the $15 you spent on transportation, and the total cost to you of attending the game is $55. Therefore, the best answer is D.

Question 7

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is:
A) zero, because it was a gift.
B) the original cost of building the mansion.
C) the amount the university would receive if it sold the mansion.
D) the cost of catering the parties at the mansion.

Accepted Answer

The opportunity cost of the mansion to the university is the next best alternative forgone, which in this case is the amount of money the university would receive if it sold the mansion. Even though it was a gift, the university could still sell the mansion and use the proceeds to fund other projects or investments. Therefore, the opportunity cost is not zero or the original cost of building the mansion, and it's not the cost of catering parties since that is a direct cost rather than an opportunity cost.

Question 8

Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:
A) marginal analysis: if the additional cost of housing is zero, then their additional benefit is also zero.
B) opportunity cost: by living in the house, they are giving up the opportunity to sell the house, buy a smaller one, and pocket the difference.
C) efficiency: If their cost of housing is now zero, they should let Zoe move in without charging her any rent. Zoe is better off, and her grandparents aren't hurt.
D) equity: it is unfair that some people are still paying off their mortgage.

Accepted Answer

The economic principle that Zoe should explain to her grandparents is opportunity cost. While their cost of housing is technically zero now that they have paid off their mortgage, they are still giving up the opportunity to sell the house and potentially profit from it. By owning the house outright, they have also tied up their wealth in the property, which means they may not have as much money to invest in other assets that could earn a return. It's important to consider the opportunity cost of any financial decision, and paying off a mortgage is no exception.

Question 9

A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7; she could work at the college library at a wage of $6; or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:
A) $7.
B) $6.
C) $13.
D) $0.

Accepted Answer

The opportunity cost is the value of the next best alternative forgone. In this case, babysitting her professor's child for $7 is the highest-paying alternative she gives up to do her homework, making $7 the opportunity cost.

Question 10

A choice made _____ is a choice whether to do a little more or a little less of something.
A) at the front end
B) in the beginning
C) at the margin
D) ceteris paribus

Accepted Answer

"At the margin" refers to the point where the decision to do a little more or a little less of something is being made. It is the incremental decision-making process, where the costs and benefits are weighed to determine whether to engage in an activity or not. This term is commonly used in economics to explain how individuals or firms make decisions based on the marginal cost and marginal benefit analysis.

Question 11

Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she:
A) considers only the price of the brownie.
B) considers only how much additional exercise she will need to do to work off the calories associated with eating another brownie.
C) compares all of the benefits and costs of eating another brownie.
D) considers whether she can do so without anyone else noticing.

Accepted Answer

Mary Sweet-Tooth considers all of the benefits and costs of eating another brownie. This includes the pleasure of eating another brownie, the added calories and potential health effects, and potentially any social consequences. She weighs these factors against each other in order to make an informed decision.

Question 12

The BEST example of making a choice at the margin is whether to:
A) buy a new computer.
B) quit your job.
C) eat another slice of pizza.
D) attend college.

Accepted Answer

Making a choice at the margin means considering the additional benefit and cost of one more unit of something. In this case, eating another slice of pizza, you would weigh the benefit of the taste and enjoyment of the pizza against the cost of the additional calories and potential negative health effects. Therefore, this is the best example of making a choice at the margin.

Question 13

Which of the following is the BEST example of making a choice at the margin?
A) buying a new car
B) quitting your job
C) drinking another cup of coffee
D) attending college

Accepted Answer

Making a choice at the margin means deciding whether to take or not take a small incremental action. In this case, deciding whether to drink another cup of coffee is an example of making a choice at the margin because it's a small, incremental decision. The other options, buying a new car, quitting your job, and attending college, are all significant decisions that involve a larger commitment and are not made at the margin.

Question 14

For which of the following decisions would marginal analysis be most relevant?
A) Should I go to college or work after graduating from high school?
B) Should I eat another doughnut?
C) Should I use $20,000 as a down payment on a house or to buy a car?
D) Should I get married?

Accepted Answer

The answer of For which of the following decisions would...

Question 15

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. This statement best represents this economic concept:
A) The real cost of something is what you must give up to get it.
B) "How much" is a decision at the margin.
C) People usually exploit opportunities to make themselves better off.
D) There are gains from trade.

Accepted Answer

This statement best represents the economic concept of opportunity cost, which states that the real cost of something is what you must give up to get it. In this case, the opportunity cost of going to Cancún with friends during spring break is not being able to go to Paris with your sister in the summer.

Question 16

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is:
A) tuition and the cost of housing.
B) tuition, the cost of housing, and the cost of books.
C) tuition, the cost of books, and forgone income.
D) forgone income only.

Accepted Answer

The answer of For a student who owns his or...

Question 17

A choice made _____ is a choice whether to do a little more or a little less of something.
A) at the fringe
B) in the beginning
C) at the margin
D) after the fact

Accepted Answer

Choice C, "at the margin," refers to making decisions based on small changes in costs or benefits. It is the best choice because it directly refers to the concept of making a choice between doing a little more or a little less of something, which is at the margin. The other choices (A) at the fringe, (B) in the beginning, and (D) after the fact, do not have the same direct connection to the concept being described.

Question 18

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) "How much" is a decision at the margin.
D) There are gains from trade.

Accepted Answer

The statement highlights the decision-making process at the margin or the additional benefits and costs of consuming one more slice of pizza based on the current level of hunger. Therefore, the best economic concept that it represents is "how much" is a decision at the margin.

Question 19

A new startup airline is offering free round-trip tickets to anywhere to the first 600 people who enter the office on the airline's first day of business. You arrive 24 hours before it is scheduled to open to be sure to get the free tickets, and you buy food from vendors while waiting in line. The cost of the tickets to you is:
A) zero.
B) the cost of food while you wait in line.
C) the cost of food while you wait in line and the opportunity cost of your time spent in line.
D) the actual value of the ticket.

Accepted Answer

While the tickets themselves may be free, you still incur costs in the form of the opportunity cost of your time spent waiting in line, as well as the cost of food from vendors while waiting. Therefore, the cost to you is the option C, which includes both factors.

Question 20

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the:
A) burger.
B) bagel.
C) burrito.
D) bagel and the burrito.

Accepted Answer

The opportunity cost of buying the burger is the enjoyment of the bagel, since that is the next best alternative. Therefore, if the burger was not an option, the bagel would have been chosen.

Quiz 1: First Principles

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and a candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is:

You decide to join the economics club, but this means you can't join the accounting club because it meets at the same time. This statement best represents this economic concept:

The economic way of thinking entails:

The concept of the margin deals with:

Marla will make $10 by tutoring for an additional hour, but she will lose an hour of studying for her economics test. Marla decides to study rather than tutor. Marla's choice indicates that she:

The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The opportunity cost of the mansion to the university is:

Zoe's grandparents are excited about finally paying off their mortgage, because, as they say, "Our cost of housing is now zero." Zoe should explain to them the economic principle of:

A choice made _____ is a choice whether to do a little more or a little less of something.

Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat another brownie, she:

The BEST example of making a choice at the margin is whether to:

Which of the following is the BEST example of making a choice at the margin?

For which of the following decisions would marginal analysis be most relevant?

If you decide to go to Cancún with your friends during spring break, you cannot go to Paris with your sister in the summer. This statement best represents this economic concept:

For a student who owns his or her own home and doesn't plan to live in the dorm, the cost of going to college is:

A choice made _____ is a choice whether to do a little more or a little less of something.

You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost of buying a burger is your enjoyment of the: