Question 1

In order to not face tradeoffs, scarcity would have to be eliminated.

Accepted Answer

Tradeoffs occur because resources are limited (scarcity). If scarcity didn't exist, then all resources would be plentiful and there would be no need to choose between one resource over another. Thus, tradeoffs would not exist.

Question 2

The opportunity cost of a decision is the value of the best foregone alternative to the decision-maker.

Accepted Answer

The statement accurately describes the concept of opportunity cost. Opportunity cost is the value of the next best alternative that a person gives up when making a decision. It is the cost of foregone opportunities that could have been attained if one had chosen a different course of action.

Question 3

An entrepreneur organizes the other factors of production and bears the business risk.

Accepted Answer

This is the definition of an entrepreneur. They take on the responsibility of organizing the resources of production and also bear the risk associated with the business.

Question 4

Resources are costly because they have alternative uses.

Accepted Answer

Resources (such as time, money, and labor) can be used in different ways, and when they are allocated to one use, it means they can't be used for another use. This opportunity cost makes resources costly.

Question 5

A country has a comparative advantage in the production of DVD players if it can produce DVD players at a lower opportunity cost than others.

Accepted Answer

This is the definition of comparative advantage. Comparative advantage is the ability of a country to produce a particular good or service at a lower opportunity cost than another country.

Question 6

If Xavier gives up a job in which he earns $23,000 per year in order to go to college full time, his foregone income is part of the opportunity cost of going to college.

Accepted Answer

Opportunity cost is the value of the next best alternative that is given up in order to pursue a certain action. In this case, Xavier giving up a job that pays $23,000 per year to attend college full time is the next best alternative that is given up, hence it is part of the opportunity cost of going to college.

Question 7

The opportunity cost of a decision is the value of all of the available alternatives that were not chosen.

Accepted Answer

The opportunity cost of a decision is the value of the next best alternative that was not chosen, not all of the available alternatives.

Question 8

When considering whether or not to consume a second slice of cake, an individual is following marginal thinking if she compares the total cost of consuming both the first and second slices with their total benefit before making a decision.

Accepted Answer

Marginal thinking involves comparing the additional benefit and cost of consuming one more unit, not the total cost and benefit of all units consumed.

Question 9

Garbage is scarce because it is abundant.​

Accepted Answer

Garbage is abundant because it is produced in large quantities as a result of human activities and consumption, not scarce.

Question 10

If you made a wish list of things you wanted but did not now have, they you became able to have the things on that list, scarcity would be eliminated.

Accepted Answer

Scarcity cannot be eliminated simply by making a wish list of things one wants. Scarcity is an inherent condition where unlimited wants and needs cannot be satisfied with limited resources. Even if the items on the wish list became available, there would still be other items or resources that are limited in supply.

Question 11

Scarcity is a problem faced by all but the wealthiest of citizens.

Accepted Answer

Scarcity is a fundamental economic problem faced by all societies, regardless of wealth, because it arises from unlimited wants and needs in the face of limited resources.

Question 12

Tractors, shovels, copy machines and computer programming expertise are all examples of scarce resources.

Accepted Answer

Scarce resources are those that are limited in supply relative to their demand, and all of the examples given fit that definition.

Question 13

Economists would predict that if salaries increased for engineers and decreased for MBAs, fewer people than before would go to graduate school in business and more than before would go in engineering, ceteris paribus.

Accepted Answer

According to the law of demand, when the price of a good (in this case, salaries) increases, the quantity demanded of that good decreases, and when the price decreases, the quantity demanded increases. Therefore, if the salaries for engineers increase and the salaries for MBAs decrease, we would expect to see fewer people pursuing MBAs and more people pursuing engineering, as engineers are now relatively better paid compared to MBAs.

Question 14

Since it is possible to grow coffee in the United States, the U.S. would gain by creating a domestic coffee industry rather than importing coffee from Brazil.​

Accepted Answer

While it is technically possible to grow coffee in the United States, the climate and soil conditions in places like Hawaii and Puerto Rico are not conducive to large-scale coffee production that could sustain the country's demand. The costs of investing in the infrastructure and resources necessary for a domestic coffee industry would likely outweigh the benefits of importing coffee from countries like Brazil that have a more established and efficient industry.

Question 15

Every choice has a cost

Accepted Answer

Every choice has consequences, whether they are positive or negative. The cost may not always be financial, but could come in the form of time, effort, or lost opportunity. Therefore, every choice has a cost.

Question 16

Everyone faces scarcity.​

Accepted Answer

Scarcity refers to the fact that resources are limited in supply but there are unlimited wants and needs of individuals. This is a universal problem faced by everyone, irrespective of their socio-economic status.

Question 17

The opportunity cost of attending college is likely to be higher for a high school graduate who leaves a job grilling hamburgers than it is for a high school dropout who leaves a job working as a computer network administrator.​

Accepted Answer

The opportunity cost of attending college includes the income one forgoes to attend school; thus, a high school dropout leaving a higher-paying job as a computer network administrator likely faces a higher opportunity cost than a high school graduate leaving a lower-paying job grilling hamburgers.

Question 18

A permanent change to a much higher price of gasoline would lead us to expect fewer gas guzzlers on the road, ceteris paribus.

Accepted Answer

A permanent increase in the price of gasoline would make gas guzzlers more expensive to operate, leading many consumers to switch to more fuel-efficient vehicles. This assumes that all other factors remain constant (ceteris paribus).

Question 19

Human capital consists of computers, tools and equipment owned by private individuals.​

Accepted Answer

Human capital refers to the knowledge, skills, and abilities possessed by individuals, not physical assets like computers, tools, or equipment. These physical assets are referred to as physical capital.

Question 20

Marginal cost is the additional cost incurred as a result of making an economic decision.

Accepted Answer

Marginal cost is defined as the additional cost incurred when producing one additional unit of a good or service. It is an important concept in economics for making decisions such as determining the optimal level of production or pricing a product. Therefore, the statement is true.

Quiz 2: Eight Powerful Ideas