Question 1

An airline ticket from Baltimore to Miami costs $525.A bus ticket is $325.Traveling by plane will take 5 hours,compared with 25 hours by bus.Thus,the plane costs $200 more but saves 20 hours of time (Hint: Note how we are "thinking at the margin" here by looking at the changes).Other things constant,an individual will gain by choosing air travel if,and only if,each hour of her time is valued at more than

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The answer of An airline ticket from Baltimore to Miami...

Question 2

The law of comparative advantage indicates that

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The law of comparative advantage suggests that a group of people can increase their total output when each good or service is supplied by the low opportunity cost producer. This means that if each person or country specializes in producing the goods or services that have the lowest opportunity cost for them and then trades with others who have a different set of low opportunity costs, they can all benefit and increase their overall output.

Question 3

The president of a large public university proclaims,"If we can get the state government to fund our new football stadium,it will not cost us anything." Evaluate this view from an economic perspective.

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Question 4

It can be said that,ultimately,consumers are the driving force in answering the three basic economic questions.Explain the consumer's role in providing these answers.

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The answer of It can be said that,ultimately,consumers are the...

Question 5

Market economies are often criticized for how they answer the basic question,"For whom are goods produced?" This criticism usually comes from people who believe that the distribution of income is not "fair." Is there some way to separate production from distribution so that we can leave production just as it is but make the distribution of income "fairer"?

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The answer of Market economies are often criticized for how...

Question 6

Middlemen,such as grocers,stockbrokers,and realtors

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Middlemen specialize in reducing transaction costs by providing services such as marketing, distribution, and information. They also provide convenience and expertise to buyers and sellers, making transactions smoother and more efficient.

Question 7

After the terrorist attacks on September 11,2001,the United States began devoting substantial resources toward the War on Terrorism,homeland security,and relief efforts.Use the production possibilities curve to demonstrate how this might affect the production of other goods in the United States.

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The answer of After the terrorist attacks on September 11,2001,the...

Question 8

Mark and John are 10-year-old twins who do not get along.They have opened separate lemonade stands and are competing with each other,selling lemonade on their block.Their mother observes that Mark is very good at making lemonade and John is an excellent young salesman.She suggests they both could make more money if they worked together.John counters that two stands will always make more money than one.Who is right? Why?

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The answer of Mark and John are 10-year-old twins who...

Question 9

An economics professor points to a student in the front row and announces that "sitting in class is the thing you value most during this time period." Is the professor correct? Why or why not?

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The answer of An economics professor points to a student...

Question 10

Which of the following is NOT true of opportunity cost?

Accepted Answer

Opportunity costs are not limited to just the monetary costs of lost options. They can also include non-monetary factors such as time, effort, and enjoyment.

Question 11

A department store buys a wool coat for $120 and sets its retail price at $300.The coat costs $85 to produce.When the coat doesn't sell,the store marks the price down to $200,then $100,and finally $70.At $70,Amy buys the coat.What was the coat's true value? Why?

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Question 12

Explain the idea of capital investment by using the story of Robinson Crusoe.What is sacrificed,and what is gained?

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Question 13

Jim values his car at $2,000,and Kelly values it at $5,000.Can value be created in this situation? How? Suppose Jim refuses to sell for less than $6,000.Is value destroyed? Why or why not?

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The answer of Jim values his car at $2,000,and Kelly...

Question 14

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?

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The answer of Kelly is an architect and she is...

Question 15

A production possibilities curve graphically represents the maximum quantities of two products produced when all resources in the economy are being used efficiently.If an economy operates at a point inside its production possibilities curve,

Accepted Answer

If an economy operates at a point inside its production possibilities curve, it is not utilizing all resources efficiently as it could produce more of both products without sacrificing the other. Therefore, it is utilizing some resources inefficiently.

Question 16

A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost,how would you modify this definition?

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The answer of A popular video program used to teach...

Question 17

Given freedom of movement for both goods and resources,if Florida producers specialize in oranges and Georgia producers specialize in peaches,then it would be reasonable to conclude that

Accepted Answer

According to the principle of comparative advantage, each country should specialize in producing the good in which it has a lower opportunity cost. If Florida specializes in producing oranges, it implies that they have a lower opportunity cost of producing oranges than peaches. Similarly, if Georgia specializes in producing peaches, it implies that they have a lower opportunity cost of producing peaches than oranges. Therefore, Georgia has a comparative advantage in producing peaches while Florida has a comparative advantage in producing oranges. Allocating more resources to producing their respective specialized goods will increase the total output of both states.

Quiz 2: Asome Tools of the Economist