Question 1

The opportunity cost of going to school rather than working is the cost of:

Accepted Answer

The opportunity cost of going to school rather than working is the potential wages that could have been earned if one had worked instead. By choosing to attend school, one is forgoing the immediate income that they could have earned by working during that time.

Question 2

Restaurants, bars, and convenience stores are often located near college campuses. These businesses frequently charge higher than normal prices. They are taking advantage of the fact that:

Accepted Answer

Students often have busy schedules with classes, studying, and extracurricular activities. It is likely that they value their time and convenience over saving money by going to locations farther from campus. Businesses near college campuses charge higher prices because they can take advantage of this preference for convenience.

Question 3

Instead of deciding to finish high school, you could have decided to work full-time. How would an economist explain your decision to receive your high school degree?

Accepted Answer

An economist would explain your decision to receive your high school degree as being based on the fact that the benefit of going to high school was greater than the benefit of working full-time. Investing time and effort in your education can lead to greater future earning potential and opportunities.

Question 4

How are changes in opportunity cost related to decision-making behavior?

Accepted Answer

Opportunity cost is the value of the next best alternative that is forgone when an economic decision is made. When the opportunity cost of doing an activity is low, it means that there is little sacrifice involved in choosing that activity over other alternatives. Therefore, individuals are more likely to choose that activity. On the other hand, when the opportunity cost of doing an activity is high, it means that there are more valuable alternatives that must be sacrificed to choose that activity. Therefore, individuals are less likely to choose that activity.

Question 5

Why would economists find it surprising if the CEO of a large company does his or her own housework?

Accepted Answer

Economists would find it surprising if the CEO of a large company does his or her own housework because the opportunity cost of their time is quite high due to their busy schedules and important responsibilities as the leader of a major organization. Therefore, it is unlikely that they would prioritize doing housework themselves over delegating the task to someone else or using their time for more valuable activities related to their job.

Question 6

An activity's marginal benefit is ________ at the optimal quantity.

Accepted Answer

At the optimal quantity of an activity, the marginal benefit is equal to the marginal cost. This equilibrium point ensures that resources are allocated efficiently, maximizing the net benefit of the activity.

Question 7

The term ________ means "additional."

Accepted Answer

The term "marginal" refers to additional or incremental changes in a decision or action. It is commonly used in economics to describe the additional cost or benefit of producing or consuming one more unit of a good or service.

Question 8

The government has been considering doing away with minting pennies because they are rarely used for purchases (with most people collecting them or throwing them away). How would an economist best explain this?

Accepted Answer

As prices have increased over time, the opportunity cost of carrying around large quantities of pennies has become too large. It's not worth the effort to keep track of, store, and carry around all those little coins. For many, it's easier to simply get rid of them or avoid using them altogether. By eliminating the penny, the hassle and cost associated with carrying around small change would be reduced.

Question 9

The opportunity cost of working rather than going to school is:

Accepted Answer

The opportunity cost of working rather than going to school is the higher wages that come with additional education. By working instead of going to school, individuals sacrifice the potential for higher wages that could come from having more education and skill.

Question 10

According to economists, one reason few professional athletes have PhD's is that the:

Accepted Answer

The opportunity cost of going to graduate school for professional athletes is too high because it involves giving up significant income and career advancement in their sports to pursue further education, which may not offer comparable benefits in their field.

Question 11

Instead of taking an economics course, you could have taken a history course that meets at the exact same time. The total cost of taking the economics course would be:

Accepted Answer

The total cost of taking the economics course includes the tuition cost for the course, the cost of the required textbook and notebook, and the fact that you cannot simultaneously take the history course. Therefore, choice D is the best answer.

Question 12

The government has been trying to mint dollar coins instead of printing paper dollar bills, but people have been reluctant to use coins instead of paper bills. How would an economist explain this reluctance?

Accepted Answer

The opportunity cost of carrying around large quantities of coins is too large, meaning that the inconvenience and physical burden of carrying coins as opposed to lighter paper bills or using digital payments outweigh the benefits of using coins for transactions.

Question 13

I asked my neighbor to rake the leaves on his lawn because they are blowing into my yard. He responded that it wouldn't be rational for him to do so. Why would this be the case?

Accepted Answer

This answer assumes that the neighbor is rational in the economic sense, meaning that they will make decisions based on maximizing their utility (in this case, their time and money). If the neighbor values their time at $200 an hour, it would not make economic sense for them to spend several hours raking leaves when they can hire someone else to do it for a lower cost.

Question 14

The opportunity cost for Elijah of going to a water park is:

Accepted Answer

The answer of The opportunity cost for Elijah of going...

Question 15

Economists believe that individuals compare the benefits and costs of various options when making a decision and in so doing act ________.

Accepted Answer

Economists generally assume that individuals act rationally, meaning that they weigh the benefits and costs of different options and choose the one that maximizes their overall well-being. This assumption forms the foundation of many economic models and theories.

Question 16

One way to promote a new business is to offer free items. If you were to open a new restaurant and offer free food, you likely would have a line out the door. How would an economist understand the behavior of those standing in line?

Accepted Answer

The answer of One way to promote a new business...

Question 17

The trade-offs that are made because of scarcity:

Accepted Answer

The trade-offs that are made because of scarcity exist in both developed and developing economies and are not dependent on the wants or needs of people. However, these trade-offs ultimately come down to individual decision-makers and their subjective value judgments about the relative importance of various alternatives. Therefore, option E is the best choice.

Question 18

When you chose a major, you likely thought about your skills. Let's say you don't enjoy dealing with numbers. How could you explain to your parents, using logic from economics, why you chose to major in English instead of mathematics?

Accepted Answer

The answer of When you chose a major, you likely...

Question 19

When most economists wake up in the morning, their first decision is whether or not to hit the snooze bar on the alarm clock. What statement best represents their thought process as a rational decision-maker?

Accepted Answer

The answer of When most economists wake up in the...

Question 20

Economists believe that optimal decisions are made up to the point where:

Accepted Answer

The optimal decision is made when the marginal benefit equals the marginal cost. This ensures that any additional activity or unit produces a net benefit that is evenly balanced between the gains and costs.

Quiz 1: The Five Foundations of Economics