Question 1

The opportunity cost of committing a crime and spending 5 years in jail:

Accepted Answer

The opportunity cost of committing a crime and spending 5 years in jail is higher for people who are employed because they will lose their income and job opportunities during the 5 years of imprisonment. The unemployed, on the other hand, may not have as high of an opportunity cost because they may not have a stable income or job at the time of committing the crime. Therefore, they may perceive the benefits of committing the crime to be higher than the opportunity cost.

Question 2

In the 2 hours between classes a student can do one of three things,ranking them from most to least desirable as: (1)chat with friends, (2)study economics,or (3)eat lunch.This student's opportunity cost of chatting with friends is:

Accepted Answer

The opportunity cost of an activity is the value of the next best alternative that must be given up. In this case, the next best alternative to chatting with friends is studying economics. Therefore, the opportunity cost of chatting with friends is the value of studying economics, which is the most desirable option after chatting with friends. As for the best choice, it would depend on the individual's priorities and goals. If the student values socializing and maintaining relationships with friends more than academic success, then chatting with friends may be the best choice. However, if the student values academic success more, then studying economics would be the best choice.

Question 3

What is thinking on the margin?

Accepted Answer

Thinking on the margin involves making choices by comparing the additional benefits and additional costs from doing a little bit more of some activity. This is the best choice as it provides a clear understanding of the concept. Choices A and B are incorrect as they do not relate to the concept of thinking on the margin. Choice C is partially correct, but it only considers the marginal costs and not the marginal benefits, making it a suboptimal choice.

Question 4

You are given a ticket to a Bob Dylan concert with a face value of $50.You only value the ticket at $40,sell it to a friend for $40,and attend a U2 concert priced at $60.The opportunity cost of attending the U2 concert is:

Accepted Answer

The answer of You are given a ticket to a...

Question 5

In The Economics of Nonhuman Societies,economist Gordon Tullock describes the economics hidden in biology (e.g. ,ants and bees).One of the lessons of the book is opportunity cost.In what way does an animal,such as an ant,face opportunity costs?

Accepted Answer

Searching for food in one direction means an ant cannot search in another direction, which means that the ant is making a trade-off between exploring a potentially fruitful area and missing out on other areas that might have food. This represents an opportunity cost for the ant, as the time and energy spent on searching in one area cannot be used to search in another area.

Question 6

Deciding whether to study an additional hour for an exam by comparing the additional benefits to the additional costs of an extra hour of study is an example of:

Accepted Answer

The act of comparing additional benefits and additional costs is a form of marginal thinking. By considering the marginal benefit and marginal cost of studying an extra hour, an individual can decide whether it is worth it to continue studying or to allocate their time to another activity. This type of decision-making is often used in economics and is an important skill for individuals to have when making choices about how to allocate their resources.

Question 7

Why is it less costly to attend college during a recession?

Accepted Answer

During a recession, the economy is generally weaker and there are fewer job opportunities available. This makes the opportunity cost of attending college lower because there are fewer alternatives for individuals to pursue. As a result, more people may choose to attend college during a recession, which can make tuition rates more competitive and possibly lower. However, it's not necessarily true that colleges give out better grades during recessions, and tuition rates may not necessarily decrease.

Question 8

Economists believe people make decisions by:

Accepted Answer

Economists believe that people make decisions by comparing the additional benefit gained from a decision (marginal benefit) with the additional cost of that decision (marginal cost). By choosing the option that has a higher marginal benefit compared to the marginal cost, people can maximize their overall satisfaction or utility.

Question 9

On June 13,2011,writer Sebastian Anthony at Extreme Tech wrote,"During the two days that the Les Paul [Google] doodle was online,those 740 million visitors spent 26 seconds more on the Google home page than normal.That's a total of almost 10.7 million man-hours spent playing with the Les Paul Google Doodle.Assuming the average Google user earns $25/hour,the doodle cost companies around the world $268 million in lost productivity." Mr.Anthony's mistake is overestimating opportunity costs.He is doing this by assuming that:

Accepted Answer

Mr. Anthony assumes that all of the 10.7 million man-hours spent on the Google Doodle would have been spent working if not for the doodle. However, this is an overestimation of the opportunity cost because some of those man-hours may have been spent on leisure activities or non-work related tasks regardless of the doodle's existence.

Question 10

Economists Jevons,Menger,and Walras are credited with:

Accepted Answer

Jevons, Menger, and Walras are considered the pioneers of the "marginal revolution" in economics. They emphasized the importance of marginal utility and marginal cost in economic decision-making, which had a significant impact on the development of neoclassical economics.

Question 11

Manuel insists he places an infinite value on his life.Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him.What Big Idea is Stefan using?

Accepted Answer

Stefan is using the concept of trade-offs, which refers to the idea that individuals have to give up something in order to gain something else. In this case, Manuel is giving up some degree of safety for the enjoyment of eating ice cream. Stefan's suspicion suggests that Manuel's claim of placing an infinite value on his life may not be entirely accurate, as he seems willing to risk his health for temporary pleasure.

Question 12

What is meant by the term "marginal revolution"?

Accepted Answer

The term "marginal revolution" refers to the shift in economic thought in the late 19th century, which emphasized the importance of marginal analysis and marginal utility in understanding economic decision-making.

Question 13

How is the unemployment rate related to the opportunity cost of college?

Accepted Answer

When the unemployment rate increases, there are fewer job opportunities available, making the option of attending college more appealing since the alternative (working) is less available. This means the opportunity cost of attending college (what one gives up by going to college, which could be working) falls because there are fewer jobs to give up.

Question 14

A student at a party deciding whether to stay a few more minutes is:

Accepted Answer

The student is considering whether the benefits of staying a few more minutes (e.g. having more fun, socializing with friends) outweigh the costs (e.g. potentially missing out on sleep or other obligations). This is an example of thinking on the margin, which involves weighing the marginal benefit and marginal cost of a decision.

Question 15

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment.What is the most likely reason why?

Accepted Answer

When jobs are hard to find, the opportunity cost of going to graduate school is low because the potential income that could be earned from a job is limited. This leads individuals to pursue further education as a means of increasing their skill set and competitiveness in the job market. Therefore, fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment.

Question 16

Susan quits her administrative job,which pays $40,000 a year,to finish her four-year college degree.Her annual college expenses are $8,000 for tuition,$900 for books,and $2,500 for food.The opportunity cost of attending college for the year is:

Accepted Answer

The opportunity cost of attending college includes both the explicit costs (tuition, books, food) totaling $11,400 and the implicit cost of the forgone salary of $40,000, summing up to $51,400. However, the correct calculation should be $40,000 (forgone salary) + $8,000 (tuition) + $900 (books) + $2,500 (food) = $51,400, which indicates an error in my explanation regarding the sum of explicit costs. The correct total opportunity cost is indeed $51,400, aligning with option D, not C as initially indicated.

Question 17

When deciding whether or not to undertake an activity,economists compare:

Accepted Answer

Economists use cost-benefit analysis to evaluate whether or not to undertake an activity. This involves comparing the additional cost of the activity with the additional benefits received. By focusing on the additional or marginal costs and benefits, economists can make a more informed decision about whether or not to pursue the activity. This approach allows for more precise calculations and helps ensure that the benefits of the activity outweigh the costs.

Question 18

What should happen to crime rates when the unemployment rate rises?

Accepted Answer

When unemployment rates rise, there are more individuals who are struggling to make ends meet and may turn to criminal activities out of necessity. In addition, those who may have been deterred from committing crimes due to the risks (such as getting caught and losing their job) may no longer perceive those risks as significant if they are unemployed. Therefore, the opportunity cost of committing a crime (i.e. giving up a legitimate job or income) has decreased, leading to an increase in crime rates.

Question 19

Air travel from Chicago to Los Angeles costs $800 and takes four hours.A bus ticket between the cities costs $100 and takes 104 hours.Other things constant,the minimum value of one's time that would induce a rational individual to fly rather than drive would be:

Accepted Answer

The difference in cost between flying and taking the bus is $800 - $100 = $700. The time saved by flying is 104 hours - 4 hours = 100 hours. Therefore, the minimum value of one's time that would induce a rational individual to fly rather than take the bus is $700 / 100 hours = $7 per hour.

Question 20

Why might the FDA err on the side of "overtesting" pharmaceutical drugs compared with the level of testing that is economically efficient?

Accepted Answer

The FDA's primary concern is to ensure the safety and effectiveness of pharmaceutical drugs for public use. As such, erring on the side of "overtesting" is a precautionary measure to minimize the risk of dangerous side effects for consumers. Economic efficiency may be a consideration, but it is secondary to the agency's mandate to protect public health.

Quiz 1: The Big Ideas