ECON 1 Chapter Notes - Chapter 1: Opportunity Cost, Sunk Costs

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carminefly707

18 Jan 2017

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Economics = study of how people make choices under conditions of scarcity and the results of those choices for society. Scarcity principle/ no-free-lunch principle = scarcity makes trade-offs necessary, although we have boundless needs and wants, the resources available to us are limited. So having more of one thing usually means having less of another. The cost-benefit principle = an individual or a firm or a society should take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs. Rational person= someone with well-defined goals who tries to fulfill those goals as best he or she can. Economic surplus= the benefit of taking an action minus its cost. Opportunity cost= value of what must be forgone to undertake an activity. Pitfall 1: you measure costs and benefits as absolute dollar amounts, not proportions ($ amounts, not %)

Related Questions

Can you solve them and tell me if youre sure 100% 100% 100%

Question 1 (1 point)

If two variables move together but are otherwise unrelated, we have

Question 1 options:

a fallacy of composition.

an econometric model.

a spurious correlation.

an efficiency problem.

evidence of a weak correlation but strong causation.

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Question 2 (1 point)

The Latin expression "ceteris paribus": is essential in ______.

Question 2 options:

collecting data.

identifying sunk costs.

evaluating theories.

recognizing scarcity.

developing spurious relationships.

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Question 3 (1 point)

Opportunity cost is best defined as

Question 3 options:

marginal cost minus marginal benefit.

the time spent on an economic activity.

the value of the best forgone alternative.

the monetary cost of an economic decision.

marginal cost plus marginal benefit.

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Question 4 (1 point)

A cost that cannot be recovered at the time a decision is being made is termed a(n)

Question 4 options:

marginal cost.

scarcity cost.

sunk cost.

average cost.

opportunity cost.

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Question 5 (1 point)

If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are

Question 5 options:

$50, $150, and $315.

$50, $41.67, and $115.

$50, 125, and $230.

$50, $175, and $405.

impossible to calculate with information given.

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Question 6 (1 point)

In general, individuals should specialize in producing those goods for which they

Question 6 options:

can produce more quickly than others.

can produce less quickly than others.

have the lowest opportunity cost compared to others.

have the highest opportunity cost compared to others.

have an average opportunity cost.

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Question 7 (1 point)

The extra benefit that comes from an extra unit of activity is called the _________ of the activity.

Question 7 options:

benefit

marginal benefit

marginal cost

average benefit

reservation benefit

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Question 8 (1 point)

The marginal benefit of an activity is the

Question 8 options:

same as the total benefits of the activity.

total benefit divided by the level of the activity.

change in the activity divided by the change in benefits.

extra benefit associated with an extra unit of the activity.

total benefit divided by the change in the level of the activity.

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Question 9 (1 point)

The fundamental problem that is studied in economics is that

Question 9 options:

consumers have limited wants in the face of unlimited resources.

markets should function without government interference.

Canada is too wealthy.

consumers have unlimited wants in the face of limited resources.

there are unlimited resources.

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Question 10 (1 point)

The range of topics, or issues, that fit within the definition of economics is

Question 10 options:

limited to market activities, e.g., buying soap.

limited to individuals and firms.

extremely wide, requiring only the ideas of choice and scarcity.

limited to governments and nations.

very limited.

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Question 11 (1 point)

When economists make predictions using the framework of a given economic model, it is usually based on

Question 11 options:

personal experiences.

important relationships between particular variables.

mathematical abstractions.

political implications.

the profit-maximizing objective.

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Question 12 (1 point)

The cost of spending an evening partying instead of studying economics is

Question 12 options:

the resulting decrease in the test score in Economics.

the time spent at the party.

the score of the test.

the cost of the textbook.

university tuition.

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Question 13 (1 point)

As one progresses from a one-person economy to a large, multi-person economy, the shape of production possibilities curve changes from

Question 13 options:

downward sloping to upwards sloping.

linear to convex (bowed into the origin).

concave (bowed out from the origin) to linear.

convex (bowed into the origin) to concave (bowed out from the origin).

linear to concave (bowed out from the origin).

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Question 14 (1 point)

Which is NOT a sunk cost?

Question 14 options:

Monthly rent of $1,000 contractually specified in a one-year lease.

An insurance premium of $50 per year, paid last month.

An attorney's retainer of $50,000 per year.

A worker's wage of $15 per hour.

A non-refundable deposit for a tender.

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Question 15 (1 point)

"We should support government intervention because the market produces undesirable outcomes" is an example of

Question 15 options:

positive economics.

normative economics.

comparative economics.

negative economics.

formative economics.

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amberchimpanzee966

Microeconomics

A	B	Answer
As a student of economics, when you speak of scarcity, you are referring to the ability of society to.	A. Extra benefit
What is the economic meaning of the expression that "There is no such thing as a free lunch?"	B. Entrepreneur.
Which expression is another way of saying "marginal benefit"?	C. Very limited government role in the economy
A tradeoff exists between two economic goals, X and Y. This tradeoff means that.	D. Price ceilings and the resulting product shortages.
The individual who brings together economic resources and assumes the risk of business ventures in a capitalist economy is called the	E. Explicit costs.
The Soviet Union economy of the 1980s would best be classified as	F. Easy entry, many firms, and differentiated products
The simple circular-flow model shows that workers, entrepreneurs, and the owners of land and capital offer their services through	G. Product markets
Laissez-faire capitalism is characterized by	H. Satisfy economic wants given limited resources.
Black markets are associated with	I. Oligopoly
Cash expenditures a firm makes to pay for resources are called	J. The Resource Markets
Which set of characteristics below best describes the basic features of monopolistic competition	K. A command System
Mutual interdependence would tend to limit control over price in which market model	L. Getting more of X requires getting less of Y
Markets in which firms sell their output of goods and services are called	M. It means that there is an opportunity cost when resources are used to provide "free" products

chocolatemuskrat416

Microeconomics Multiple choice questions. Please answer all the questions.

1. Scarcity:
A. exists because resources are limited while human wants are unlimited.
B. means we are unable to have as much as we would like to have.
C. will likely be eliminated as technology continues to expand.
D. is not an issue addressed in economics.

2. People are forced to make choices because of:
A. unlimited wants and unlimited resources.
B. limited wants and unlimited resources.
C. unlimited wants and limited resources.
D. limited wants and limited resources.
E. irrational wants and limited resources.

3. Which of the following is closest to the definition of capital?
A. c and e.
B. c and d.
C. Tools, equipment, means of transportation
D. Factories and machinery.
E. Borrowed money.

4. Which one of the following is the most accurate definition of economics?
A. Economics is the study of stocks and bonds.
B. Economics is the study of how people allocate unlimited resources.
C. Economics is the study of how consumers choose to spend their income.
D. Economics is the study of how society chooses to allocate scarce resources.

5. The basic difference between macroeconomics and microeconomics is:
A. microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade.
B. microeconomics concentrates on the behavior of individual consumers while macroeconomics focuses on the behavior of firms.
C. microeconomics concentrates on the behavior of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.
D. microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment.

6. Which of the following is not a resource?
A. Land.
B. Labor.
C. Money.
D. Capital.

7. Which of the following would an economist classify as capital?
A. 100 shares of Microsoft stock.
B. $50 bill.
C. credit card.
D. lawyer's personal computer.

8. Economics, according to its definition, studies how people:
A. earn and spend money.
B. invest in the stock and bond markets.
C. make choices in the face of scarcity.
D. supply goods in response to demand.

9. Which of the following is the best example of a microeconomic topic?
A. The impact that the money supply has on inflation.
B. The reasons for increases in the price of soft drinks.
C. The effect that federal budget deficits have on the interest rate.
D. The tradeoff between inflation and unemployment.

10. Which of the following is a macroeconomics topic?
A. Wages of textile workers in the Northeast.
B. The cost of producing 10,000 bookcases.
C. The economy's annual growth rate.
D. National demand for fish.
E. Effects of farm subsidies on food prices.

11. An economic theory claims that a rise in gasoline prices will cause gasoline purchases to fall, Ceteris paribus. The phrase "Ceteris paribus" means that:
A. other relevant factors like consumer incomes must be held constant.
B. the gasoline prices must first be adjusted for inflation.
C. the theory is widely accepted but cannot be accurately tested.
D. consumers' need for gasoline remains the same regardless of the price.

12. An economic model is:
A. a plastic scaled version of the economy.
B. a complete depiction of reality.
C. an abstraction from reality.
D. applicable to consumer behavior but not to producer behavior.
E. not an accepted tool of the economics profession.

13. Which of the following sayings best reflects the concept of opportunity cost?
A. "You can't teach an old dog new tricks."
B. "There is no such thing as a free lunch."
C. "I have a baker's dozen."
D. "There's no business like show business."

14. The opportunity cost of watching television is:
A. all of the alternative programs that appear on other stations.
B. zero because there is no money expenditure involved.
C. the alternative use of the time foregone by watching the program.
D. zero if it benefits you.

15. Which of the following does not illustrate opportunity cost?
A. If I study, I must give up going to the football game.
B. If I buy a computer, I must do without a 35" television.
C. More consumer spending now means more spending in the future.
D. If I spend more on clothes, I must spend less on food.

16. When deciding whether to buy a second car, marginal analysis indicates that the purchaser should compare the:
A. benefits expected from two cars with the cost of both.
B. additional benefits expected from a second car with the cost of the two cars.
C. dollar cost of the two cars with the potential income that the cars will generate.
D. additional benefits of the second car with the additional cost of the second car.

17. According to marginal analysis, you should spend more time studying economics if the extra benefit from an additional hour of study:
A. is positive.
B. outweighs the extra cost.
C. exceeds the benefits of the previous hour of study.
D. will raise your exam score.

ECON 1 Chapter Notes - Chapter 1: Opportunity Cost, Sunk Costs

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