study for econ Ecn 101 exam 1 (part one)
Economists study how people make decisions.
true
The overriding reason why households and societies face many decisions is that
resources are scarce
Candice is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that
people face trade-offs
When economic benefits are distributed uniformly across society
equality
When a society gets the most it can from its scarce resources
efficiency
If the United States government lowers the income taxes on the wealthiest Americans, while decreasing welfare payments to the poorest Americans, the result will likely be an _______ in efficiency and a ________ in equality in the United States.
increase; decrease
When the government implements programs such as progressive income tax rates, which of the following is likely to occur?
Equality is increased and efficiency is decreased
Elena's aunt gave her $100 for her birthday with the condition that Elena buys herself something. In deciding how to spend the money, Elena narrows her options down to four choices: Option A, Option B, Option C, and Option D. Each option costs $100. Finally, she decides on Option B. The opportunity cost of this decision is
the value to Elena of the option she would have chosen had Option B not been available
When computing the opportunity cost of attending a concert you should include
the price you pay for the ticket and the value of your time.
Consider Luis's decision to go to college. If he goes to college, he will spend $21,000 on tuition, $11,000 on room and board, and $1,800 on books. If he does not go to college, he will earn $16,000 working in a store and spend $7,200 on room and board. Luis's cost of going to college is
42,600.
A rational decisionmaker
takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.
Ana is training for a triathlon, a timed race that combines swimming, biking, and running.
Consider the following sentence: Because her pool sessions are helping her swim more quickly, Ana plans to reduce by 1 hour per week the time she spends training on the bike and increase by 1 hour the time she spends in the swimming pool; however, her husband says that she should stop doing any biking and running and spend all 20 hours per week in the pool.
Which basic principle of individual choice does Ana's plan illustrate that her husband's advice does not?
Many decisions are made on the margin.
Suppose the large number of auto accidents in a small town results in new legislation that requires all citizens of the town to install new anti-lock brakes on their cars. These new brakes cut the time it takes a car to stop by 50%, allowing drivers to avoid collisions with other cars and pedestrians more easily.
The new brakes __________ the probability that a vehicle will collide with another vehicle but also give drivers an incentive to drive more _________, which could potentially _______ the number of car accidents in the town.
decrease; recklessly; increase
Savion is restoring a car and has already spent $4,000 on the restoration. He expects to be able to sell the car for $5800. Savion discovers that he needs to do an additional $2,400 of work to make the car worth $5,800 to potential buyers. He could also sell the car now, without completing the additional work, for $3,800. What should he do?
He should sell the car now for $3,800.
sell day-old bagels, so all unsold bagels are thrown away at 7 p.m. each day. The cost of making and selling a dozen bagels is $1.00; there are no costs associated with throwing bagels away. If the manager has eight dozen bagels left at 6:30 p.m. on a particular day, which of the following alternatives is most attractive?
Lower the price of the remaining bagels, even if the price falls below $1.00 per dozen.
In a market economy, who makes the decisions that guide most economic activity?
Firms and households
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
People in the U.S. state of Iowa eat both corn and potatoes. It is technically possible for farmers to grow both corn and potatoes in Iowa, yet almost no farmers grow potatoes. Instead, every year, Iowa exports corn and imports potatoes from the U.S. state of Idaho, where farmers specialize in potatoes.
Which of the following principles of economic interaction best describes this scenario?
Trade can make everyone better off.
Trade
allows specialization, which reduces costs.
There is only one car dealership in a small town, giving the dealership the ability to influence the price of cars.
Market Power
A manufacturing plant dumps chemical waste into a nearby river, poisoning the water supply for a small town downstream.
Externality
A consumer's optimal choice when buying a flat-screen TV
Microeconomics
The government's decision on how much to spend on public projects
Macroeconomics
The effect of an increase in consumer income on demand for smart phones
Microeconomics
Breast cancer is the fifth most common cause of cancer death.
Postive