Question 1

Optimal decisions are made at the point where marginal benefit is maximized.

Accepted Answer

Optimal decisions are made at the point where marginal benefit equals marginal cost, not where marginal benefit is maximized.

Question 2

What is an economic market?

Accepted Answer

The answer of What is an economic market?...

Question 3

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps,then the difference of $300 is the marginal cost of producing the 5th lamp.

Accepted Answer

The difference of $300 is the marginal cost of producing the 6th lamp, not the 5th. The cost given is cumulative, so the marginal cost refers to the cost of producing one more unit beyond what has already been produced.

Question 4

Suppose the extra cost for a company to advertize for one extra day each week on a local TV station is $1,500.Then,the company should advertize on that additional day if it can generate total revenue of $1,500 each week.

Accepted Answer

The answer of Suppose the extra cost for a company...

Question 5

Suppose the extra cost to a car wash of advertising one additional day each month on a local radio station is $175.Then,the car wash should advertize that one additional day each month if doing so brings in additional revenue of $175 or more each month.

Accepted Answer

The extra cost of advertising for one additional day is $175. If the additional revenue generated by this advertising is also $175 or more each month, then the car wash would break even or make a profit. Therefore, it would be beneficial for the car wash to advertise for that extra day each month.

Question 6

Which of the following statements is false?
A)Anytime you have to decide which action to take you are facing an economic trade-off.
B)Trade-offs do not apply when the consumers purchase a product for which there is excess supply,such as a stock clearance sale.
C)Every individual,no matter how rich or poor,is faced with making trade-offs.
D)Economics is a social science that studies the trade-offs we are forced to make because of scarcity.

Accepted Answer

Trade-offs always apply regardless of the circumstances of the purchase. Excess supply may lead to a lower price, but the consumer still has to decide whether or not to make the purchase and allocate their resources accordingly.

Question 7

Explain the term "economics."

Accepted Answer

The answer of Explain the term "economics."...

Question 8

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

Accepted Answer

The answer of What is scarcity,and why is it a...

Question 9

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?

Accepted Answer

The answer of Assume that a health spa can earn...

Question 10

Every society faces economic trade-offs.This means
A)some people live better than others do.
B)not everyone can have enough goods to survive.
C)producing more of one good means less of another good can be produced.
D)society's output cannot be made available to all.

Accepted Answer

Economic trade-offs refer to the limited resources of a society, and the decisions that must be made about how to allocate those resources. When society decides to produce more of one good, it means that resources must be diverted from the production of another good. This creates a trade-off, as producing more of one good necessarily means producing less of another. Therefore, choice C is the best answer.

Question 11

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?
A)4 machine-made cigars
B)one-quarter of a machine-made cigar
C)$10.00
D)$2.50

Accepted Answer

The opportunity cost is the value of the next best alternative that must be sacrificed in order to choose a certain option. In this case, the opportunity cost of buying a hand-rolled cigar is what you can buy with the same amount of money if you choose to buy a machine-made cigar instead. Therefore, the opportunity cost is $2.50, which means you can buy four machine-made cigars with the same amount of money as one hand-rolled cigar. Therefore, the best choice is to buy four machine-made cigars (option A) if the focus is on maximizing the number of cigars, rather than the quality.

Question 12

Opportunity cost is defined as
A)the benefit of an activity.
B)the monetary expense associated with an activity.
C)the highest valued alternative that must be given up to engage in an activity.
D)the total value of all alternatives that must be given up to engage in an activity.

Accepted Answer

Opportunity cost refers to the value of the next best alternative that is forgone in order to undertake a certain activity. Option C, "the highest valued alternative that must be given up to engage in an activity," accurately captures this concept. Options A and B are not fully accurate as they do not necessarily capture the idea that there is a tradeoff involved in choosing one option over another. Option D is too broad and does not specify the particular alternative that is being forgone.

Question 13

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

Accepted Answer

The answer of What does the word "marginal" mean in...

Question 14

An economic model is a complex version of reality used to analyze real-world economic situations.

Accepted Answer

An economic model is a simplified version of reality used to analyze real-world economic situations and understand how economies function.

Question 15

Who receives the goods and services produced in the United States depends largely on
A)how income is distributed.
B)how the goods and services are produced.
C)what goods and services are produced.
D)government redistribution.

Accepted Answer

The distribution of income is a major factor in determining who receives the goods and services produced in the United States. People with higher incomes have more purchasing power and can afford to buy more goods and services, while those with lower incomes may not be able to afford as much. In addition, the way that income is distributed can impact overall demand for goods and services, which can in turn affect production levels.

Question 16

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

Accepted Answer

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Question 17

Trade-offs force society to make choices when answering what three fundamental questions?
A)What will be the prices of goods and services;how will these goods and services be produced;and who will receive them?
B)What goods and services to produce;how will these goods and services be produced;and who receives them?
C)Who gets jobs;what wages do workers earn;and who owns what property?
D)How much will be saved;what will be produced;and how can these goods and services be fairly distributed?

Accepted Answer

The three fundamental questions of economics are what goods and services to produce, how will they be produced, and who receives them. Trade-offs force society to make choices on how to answer these questions, taking into consideration the limited resources available. Therefore, the best choice is option B, which includes all three fundamental questions of economics. The other choices either include only one or two of the questions or include irrelevant questions.

Question 18

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door.Since the opening of Kerrie's Off-Key Karaoke,the opportunity cost of playing skeeball at Skeeter's has
A)decreased.
B)increased.
C)fallen to zero.
D)not changed.

Accepted Answer

The opportunity cost of playing skeeball at Skeeter's has increased because now customers have another option for entertainment next door. They now have to choose between playing skeeball or participating in karaoke at Kerrie's, which means the opportunity cost of playing skeeball has gone up.

Question 19

Which of the following is an example of an economic trade-off that a firm has to make?
A)whether it is cheaper to produce with more machines or with more workers
B)deciding why consumers want its products
C)whether or not consumers will buy its products
D)deciding what profit margin it desires for its products

Accepted Answer

The decision of whether to use more machines or more workers is an economic trade-off because it involves weighing the costs and benefits of each option and choosing the most efficient and cost-effective method of production. The other choices listed do not involve a trade-off between two alternatives.

Question 20

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?
A)zero,since he will no longer be earning a salary
B)depends on the "going rate" for stay-at-home dads
C)at least $60,000
D)the value he attributes to the joy of parenting

Accepted Answer

The opportunity cost of Ted's decision is the value of the best alternative that he gave up, which is his $60,000-a-year job. Therefore, the answer is C.

Quiz 1: Economics: Foundations and Models

Optimal decisions are made at the point where marginal benefit is maximized.

What is an economic market?

If it costs Hobie $900 to produce 5 lamps and $1,200 to produce 6 lamps,then the difference of $300 is the marginal cost of producing the 5th lamp.

Suppose the extra cost for a company to advertize for one extra day each week on a local TV station is $1,500.Then,the company should advertize on that additional day if it can generate total revenue of $1,500 each week.

Suppose the extra cost to a car wash of advertising one additional day each month on a local radio station is $175.Then,the car wash should advertize that one additional day each month if doing so brings in additional revenue of $175 or more each month.

Which of the following statements is false?

Explain the term "economics."

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

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?

Every society faces economic trade-offs.This means

The Stogie Shop,a cigar store in the mall,sells hand-rolled cigars for $10.00 and machine-made cigars for $2.50 each.What is the opportunity cost of buying a hand-rolled cigar?

Opportunity cost is defined as

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

An economic model is a complex version of reality used to analyze real-world economic situations.

Who receives the goods and services produced in the United States depends largely on

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

Trade-offs force society to make choices when answering what three fundamental questions?

Skeeter's Skeeball Castle has seen its business slow down ever since Kerrie's Off-Key Karaoke opened up next door.Since the opening of Kerrie's Off-Key Karaoke,the opportunity cost of playing skeeball at Skeeter's has

Which of the following is an example of an economic trade-off that a firm has to make?

Ted quits his $60,000-a-year job to be a stay-at-home dad.What is the opportunity cost of his decision?