Question 1

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

Accepted Answer

The lesson of sunk costs is to ignore money that has already been spent and cannot be recovered, focusing instead on the costs and benefits of future decisions.

Question 2

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

Accepted Answer

The opportunity cost of choosing one option over another is the value of the opportunity forgone. In this case, by choosing to play basketball instead of studying, Gomer's opportunity cost is the benefit his grades would have received from an hour of studying.

Question 3

Scarcity implies that:

Accepted Answer

Scarcity refers to the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It means that there are not enough resources to produce enough goods and services to fulfill all human desires, leading to the need for allocation and prioritization.

Question 4

As a person receives more of a good, the _______________ from each additional unit of the good declines.

Accepted Answer

The concept described is marginal utility, which states that as a person consumes more of a good, the satisfaction (utility) gained from each additional unit decreases.

Question 5

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.

Accepted Answer

The budget constraint model is used by economists to illustrate the process of individual choice in a situation of scarcity. It shows the combination of goods and services that a consumer can afford with a limited budget, effectively outlining the opportunity set or the choices available.

Question 6

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Accepted Answer

Marginal analysis is the correct answer because it involves evaluating the benefits and costs of choosing a little more or a little less of a good, which is a fundamental concept in economics for making decisions.

Question 7

Attending college is a case where the ________________ exceeds the monetary cost.

Accepted Answer

The correct term is "opportunity cost," which refers to the cost of what you have to give up in order to choose something else. In the context of attending college, the opportunity cost exceeds the monetary cost because it includes not only the tuition and fees but also the income you forego by not working full-time.

Question 8

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

Accepted Answer

The general pattern described is related to the concept of diminishing marginal utility, where the first few units of a good provide higher utility or satisfaction compared to later units.

Question 9

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

Accepted Answer

The opportunity cost includes the $4 parking fee and the $40 ($10/hour for 4 hours) that could have been earned working instead of attending class, totaling $44.

Question 10

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.

Accepted Answer

The slope of the budget constraint represents the rate at which a consumer can trade one good for another while staying within their budget. This rate is determined by the relative prices of the two goods, calculated by dividing the price of one good by the price of the other.

Question 11

Marginal thinking is best demonstrated by:

Accepted Answer

Marginal thinking involves evaluating the additional benefits and costs of a decision. In choice A, the decision to spend one more hour studying is based on weighing the marginal benefit (improved quiz score) against the marginal cost (sacrificed time).

Question 12

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Accepted Answer

Normative statements are those that express a judgment about what ought to be, describing how the world should be, in contrast to positive statements that describe the world as it is.

Question 13

The marginal benefit of a slice of pizza is the:

Accepted Answer

The marginal benefit of a slice of pizza is the maximum amount that a consumer is willing to pay for that slice, reflecting the value of the slice to the consumer.

Question 14

Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.

Accepted Answer

Positive statements are factual and describe the world as it is, whereas normative statements express values or how the world should be.

Question 15

The opportunity cost of an action:

Accepted Answer

The opportunity cost of an action is a subjective valuation, reflecting the next best alternative foregone as a result of choosing one option over another. It is determined by the individual making the choice, as it involves personal preferences and valuations of what is being given up.

Question 16

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

Accepted Answer

The answer of The law of ____________________________ explains why people...

Question 17

Scarcity exists because of:

Accepted Answer

Scarcity exists due to unlimited wants and limited resources, meaning there are not enough resources to satisfy all human wants and needs. This fundamental economic problem drives the need for allocation and prioritization in the use of resources.

Question 18

The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:

Accepted Answer

The promise can be kept if the economy either utilizes its existing resources more efficiently, moving from a point inside the production possibilities curve to a point on the curve (B), or if there is an outward shift in the production possibilities frontier due to technological improvements or other factors that increase the economy's capacity (C). Both scenarios allow for increased defense spending without sacrificing other areas of the economy, unlike moving along the curve (A) which would require trade-offs.

Question 19

The opportunity cost of attending university is likely to include all except which of the following?

Accepted Answer

The opportunity cost of attending university includes the income forgone by not working, tuition fees, and the cost of required textbooks, but not personal expenses like haircuts, which you would likely incur regardless of attending university.

Question 20

Why is there scarcity?

Accepted Answer

Scarcity exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources. This fundamental economic problem arises because resources are finite while desires are infinite, leading to the need for allocation and prioritization in the use of resources.

Quiz 2: Choice in a World of Scarcity