Question 1

Recall Application 3, "Jasper Johns and House Painting," to answer the following questions:
-According to the application, if Jasper Johns earns $5,000 per day painting art and $1,500 per day painting houses, he should:

Accepted Answer

Jasper Johns should only paint art because he earns significantly more per day ($5,000) compared to painting houses ($1,500).

Question 2

-Refer to Table 2.4. The marginal product of the 2nd tank of fertilizer is:

Accepted Answer

The marginal product is the additional output produced by using one more unit of input. If the 2nd tank of fertilizer increases output by 20 truckloads of fruit, then the marginal product is 20 truckloads.

Question 3

Suppose prices increase by 3% per year. What nominal percentage return on your savings account would you require to get a 3% real return?

Accepted Answer

To achieve a 3% real return with a 3% inflation rate, you need a nominal return of approximately 6%, calculated using the formula: (1 + nominal rate) = (1 + real rate) * (1 + inflation rate).

Question 4

Figure 2.3
-In Figure 2.3, the move from production possibility curve YZ to production possibility curve XV, could be caused by:

Accepted Answer

The answer of  Figure 2.3
-In Figure 2.3, the move...

Question 5

Recall Application 1, "Don't Forget the Costs of Time and Invested Funds," to answer the following questions.
-According to the application, if Betty's living expenses rises, then the opportunity costs of running a business:

Accepted Answer

The answer of Recall Application 1, "Don't Forget the Costs...

Question 6

Recall Application 3, "Jasper Johns and House Painting," to answer the following questions:
-Suppose that a house painter can earn $200 per day painting houses and painting Jasper Johns' house requires 25 days of labor. According to the application, if Jasper Johns earns $5,000 per day painting art, then he must:

Accepted Answer

Jasper Johns should paint his house only if he can do it in less than a day because his opportunity cost of painting art is $5,000 per day, which is much higher than the $200 per day he would save by painting his own house.

Question 7

Recall Application 2, "Why Not Walk Up an Escalator?," to answer the following questions:
-According to the application, an individual would walk up the escalator instead of just standing still if:

Accepted Answer

According to the application, an individual would walk up the escalator instead of just standing still if the marginal benefit exceeds the marginal cost of walking up the escalator. This means that the benefit gained from walking up the escalator (such as gaining time or getting exercise) is greater than the cost of walking up the escalator (such as physical exertion or risk of injury). Therefore, option B is correct.

Question 8

You rent a copy of a new action/adventure movie. The rental is for seven days and you watch the movie on the first day. You tell a friend about the film and your friend asks to come over and watch the movie with you before it is due back. What is your opportunity cost of watching the movie a second time?

Accepted Answer

Opportunity cost refers to the value of the best alternative forgone. In this case, the opportunity cost of watching the movie a second time would depend on what else you could do with that time. If there are other enjoyable activities you could do with your friend, such as going out to a movie theater or playing a game, then the opportunity cost of re-watching the movie would be higher. If, however, there are no other plans and you still enjoy the movie, then the opportunity cost may be lower. The rental cost and your liking of the movie are not relevant in determining the opportunity cost.

Question 9

-Julianne runs a business and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Julianne's marginal benefit of staying open per hour is $24. If she is following the marginal principle, how many hours should Julianne stay open?

Accepted Answer

Julianne should stay open as long as the marginal benefit ($24) is greater than or equal to the marginal cost. If the marginal cost for the 6th hour is $24 or less, she should stay open for 6 hours.

Question 10

Jessica, aged three, decides to dress up like Sleeping Beauty for Halloween. What is her opportunity cost of this decision?

Accepted Answer

The opportunity cost of Jessica's decision to dress up like Sleeping Beauty is the fact that she cannot dress up like her second choice, which is Barbie. This is because opportunity cost is the value of the next best alternative that is foregone in order to pursue a certain action. Since Jessica has chosen to dress up like Sleeping Beauty, she cannot dress up like Barbie, which was her second choice. Therefore, the opportunity cost of her decision is the enjoyment or satisfaction that she would have derived from dressing up like Barbie.

Question 11

Figure 2.3
-In Figure 2.3, an efficient production point on production possibility curve YZ is

Accepted Answer

The answer of  Figure 2.3
-In Figure 2.3, an efficient...

Question 12

According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:

Accepted Answer

The principle of diminishing returns states that as more and more units of a variable factor of production (in this case, the factor that was doubled) are added to a fixed set of resources (the other factors of production), the marginal product of the variable factor will eventually start to decrease. This means that while output will increase initially when the factor is doubled, it will eventually start to increase at a diminishing rate and may even decrease. Therefore, it is most likely that output will less than double in the long run.

Question 13

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions:
-As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre or production exhibited:

Accepted Answer

The crop yield increases at a decreasing rate as more bags of nitrogen are applied, indicating diminishing returns to fertilizer.

Question 14

The opportunity cost of something is:

Accepted Answer

Opportunity cost refers to the next best alternative that is forgone in order to choose a certain option. In other words, it is what you sacrifice to get something. Therefore, the best choice is D. The other options (A, B, and C) are not accurate definitions of opportunity cost.

Question 15

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions:
-As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre. The results show that as more bags of nitrogen was added, holding all other inputs constant, output:

Accepted Answer

The crop yield increased with each additional bag of nitrogen, but the amount of increase decreased with each additional bag, indicating a diminishing marginal return. This is consistent with the law of diminishing marginal returns in economics, which states that as more units of one input (in this case, nitrogen) are added while holding other inputs constant, the additional output produced will eventually decrease.

Question 16

Figure 2.2
-Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Accepted Answer

The opportunity cost of producing an additional unit (fourth highway) is the amount of the other good (medical care) that must be given up. According to the production possibilities curve, building the fourth highway requires sacrificing medical care for 70,000 people.

Question 17

Figure 2.2
-Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The figure shows that as more highways are built, the opportunity cost of building each additional highway is:

Accepted Answer

The production possibilities curve in Figure 2.2 is concave, which means that the opportunity cost of producing each additional highway is increasing. This is because as more highways are built, resources that are better suited for medical care production are being diverted to highway production, resulting in diminishing returns to highway production and an increasing opportunity cost. Therefore, the best choice is to produce a lower quantity of highways and a higher quantity of medical care, where the opportunity cost is lower.

Question 18

Figure 2.1
-Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

Accepted Answer

Increasing the production of farm goods typically requires reallocating resources from the production of factory goods, affecting their production levels.

Question 19

Nancy and Melissa both have broken light fixtures in their living rooms. Nancy opts to hire an electrician, while Melissa spends two hours replacing the fixture herself. Which of the following is a possible explanation of this behavior?

Accepted Answer

All of the options could explain the behavior: Nancy might value her time more (A), dislike the task more (B), or be less skilled at it (C).

Question 20

If the government estimates that the marginal cost of building a bridge is $100 million, while the marginal benefit is $150 million, the marginal principle dictates that the government should:

Accepted Answer

According to the marginal principle, the government should undertake a project if the marginal benefit exceeds the marginal cost. In this case, the marginal benefit of building the bridge ($150 million) is greater than the marginal cost ($100 million), so the government should build the bridge. Therefore, option B is the best choice.

Quiz 2: The Key Principles of Economics

Recall Application 3, "Jasper Johns and House Painting," to answer the following questions: -According to the application, if Jasper Johns earns $5,000 per day painting art and $1,500 per day painting houses, he should:

-Refer to Table 2.4. The marginal product of the 2nd tank of fertilizer is:

Suppose prices increase by 3% per year. What nominal percentage return on your savings account would you require to get a 3% real return?

Figure 2.3 -In Figure 2.3, the move from production possibility curve YZ to production possibility curve XV, could be caused by:

Recall Application 1, "Don't Forget the Costs of Time and Invested Funds," to answer the following questions. -According to the application, if Betty's living expenses rises, then the opportunity costs of running a business:

Recall Application 2, "Why Not Walk Up an Escalator?," to answer the following questions: -According to the application, an individual would walk up the escalator instead of just standing still if:

Jessica, aged three, decides to dress up like Sleeping Beauty for Halloween. What is her opportunity cost of this decision?

Figure 2.3 -In Figure 2.3, an efficient production point on production possibility curve YZ is

According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions: -As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre or production exhibited:

The opportunity cost of something is:

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The figure shows that as more highways are built, the opportunity cost of building each additional highway is:

Figure 2.1 -Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

Nancy and Melissa both have broken light fixtures in their living rooms. Nancy opts to hire an electrician, while Melissa spends two hours replacing the fixture herself. Which of the following is a possible explanation of this behavior?

If the government estimates that the marginal cost of building a bridge is $100 million, while the marginal benefit is $150 million, the marginal principle dictates that the government should: