Question 1

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?

Accepted Answer

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

Question 2

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?

Accepted Answer

The answer of A department store buys a wool coat...

Question 3

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.

Accepted Answer

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

Question 4

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.

Accepted Answer

The answer of The president of a large public university...

Question 5

Which of the following is NOT true of opportunity cost?

Accepted Answer

Opportunity costs are not limited to just monetary costs. They can also include non-monetary costs such as time and effort, as well as intangible costs such as missed opportunities for personal growth or social connections.

Question 6

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

Accepted Answer

The answer of Explain the idea of capital investment by...

Question 7

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

Accepted Answer

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

Question 8

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?

Accepted Answer

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

Question 9

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?

Accepted Answer

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

Question 10

Middlemen, such as grocers, stockbrokers, and realtors

Accepted Answer

Middlemen, such as grocers, stockbrokers, and realtors, specialize in reducing transactions costs for both the buyer and the seller. They offer services such as distribution, marketing, and expertise in the market, which can result in increased efficiency and lower costs for all parties involved in the transaction. Therefore, middlemen provide value to both the buyer and the seller. They play an important role in the capitalist economy.

Question 11

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?

Accepted Answer

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

Question 12

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.

Accepted Answer

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

Question 13

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"?

Accepted Answer

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

Quiz 2: B : Some Tools of the Economist