Question 1

What is scarcity,and why is it a fundamental concept in economics?

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Question 2

What is a marginal benefit?

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Question 3

What is an economic model?

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Question 4

What is a marginal cost?

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Question 5

Assume that a health spa can earn an additional $35,000 of revenue each year from advertising every day in a local newspaper.What must the additional cost of this daily advertising be to make this advertising economically rational?

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Question 6

Which of the following is not an example of an economic trade-off that a firm has to face?

Accepted Answer

The decision of whether or not consumers will buy a firm's products is not a trade-off, but rather a factor that affects the demand for the product. The other options involve trade-offs that a firm must make in terms of production factors, such as labor and machinery, or strategic decisions, such as outsourcing or producing more of a product.

Question 7

Assume that a florist can earn an additional $20,000 of revenue each year from advertising once a week on a local television station.What must the additional cost of this once-a-week advertising be to make this advertising economically rational?

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Question 8

The idea that because of scarcity,producing more of one good or service means producing less of another good or service refers to the economic concept of

Accepted Answer

The concept of trade-off explains that because of scarcity, producing more of one good or service requires producing less of another good or service. Optimization and efficiency refer to maximizing output with minimum input, while equity refers to fairness in distribution.

Question 9

What is an economic market?

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Question 10

Suppose a used car dealer can earn an additional $25,000 in revenue per year by increasing advertising on a local radio station from 3 times a day to 5 times a day.At what additional cost would this increase in advertising not be considered economically rational?

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Question 11

Which of the following statements is true?

Accepted Answer

Every individual, regardless of their socioeconomic status, has to make trade-offs due to limited resources. Option A is incorrect because economic equity refers to fairness in the distribution of resources and income. Option B is incorrect because even in scenarios with excess supply, consumers have to make trade-offs based on their preferences and budget constraints. Option D is incorrect because economics studies how individuals and societies allocate limited resources to satisfy their unlimited wants and needs, but it does not necessarily focus solely on trade-offs.

Question 12

The three fundamental questions that any economy must address are:

Accepted Answer

The three fundamental questions that any economy must address are what goods and services to produce, how will these goods and services be produced and who receives them. This choice accurately reflects all three of these essential questions. A is incorrect because it focuses only on the pricing of goods and services, while C is too narrow, focusing only on employment and ownership, and D misses the mark by including an unrelated question about savings.

Question 13

Explain the term "economics."

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Question 14

Billie's Billiard Barn has seen its business slow down ever since Patti's Ping Pong Parlour opened up across the street.Since the opening of Patti's Ping Pong Parlour,the opportunity cost of shooting pool at Billie's Billiard Barn has ________ for Billie's customers who also like to play ping pong.

Accepted Answer

The opening of Patti's Ping Pong Parlour has created a new option for Billie's customers, which means they now have to choose between playing pool at Billie's or playing ping pong at Patti's. Therefore, the opportunity cost of shooting pool at Billie's has increased because now customers have given up the opportunity to play ping pong at Patti's.

Question 15

What does the word "marginal" mean in economics? What is a marginal benefit? What is a marginal cost? What is marginal analysis?

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Question 16

The highest valued alternative that must be given up to engage in an activity is the definition of

Accepted Answer

Opportunity cost is the highest valued alternative that must be given up to engage in an activity. Economic equity refers to fairness in the distribution of resources and income. Marginal benefit refers to the additional benefit received from consuming one more unit of a good or service. Marginal cost refers to the additional cost incurred from producing one more unit of a good or service. None of these definitions are equivalent to opportunity cost.

Question 17

Describe what has happened to state obesity rates in the United States since 1994.

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Question 18

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each
-What is the opportunity cost of buying a Russian tea cake?

Accepted Answer

The opportunity cost of buying a Russian tea cake is the value of the next best alternative foregone, which is the cost of a cappuccino. Therefore, for the price of one Russian tea cake, a customer could have bought 2/5 of a cappuccino ($1.00 divided by $2.50). This is the best choice because it accurately reflects the opportunity cost of choosing the Russian tea cake over the cappuccino.

Question 19

Society faces a trade-off in all of the following situations except

Accepted Answer

When some previously unemployed workers find jobs, it does not necessarily result in a trade-off. It can be beneficial for both the individuals who find jobs and for society as a whole. The other choices (A, B, and C) all involve trade-offs that must be made in order to allocate resources efficiently.

Question 20

The Coffee Nook,a small cafe near campus,sells cappuccinos for $2.50 and Russian tea cakes for $1.00 each
-What is the opportunity cost of buying a cappuccino?

Accepted Answer

The opportunity cost of buying a cappuccino is the value of the next best alternative foregone, which in this case is the value of the Russian tea cakes. Therefore, the opportunity cost of buying a cappuccino is the number of Russian tea cakes that could have been purchased with the same amount of money. $2.50/$1.00 per Russian tea cake = 2 1/2 Russian tea cakes. Therefore, the best choice is A.

Quiz 1: Economics: Foundations and Models