Q: Which equation correctly represents the opportunity cost of going to college for a year?

$$\text{Opportunity Cost} = \text{Tuition} + \text{Books} + \text{Fees} + \text{Foregone Earnings}$$

Question 1

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative that is forgone when a decision is made.

Question 2

A manager considers hiring an additional worker who would increase weekly sales revenue by $$400, but the worker's wage is 300 $$per week. According to marginal analysis, what should the manager do?

Accepted Answer

Hire the worker because the marginal benefit ($$400) exceeds the marginal cost (300$$). $$400 \u003e 300$

Question 3

Which principle explains why people buy fewer doughnuts when the price increases?

Accepted Answer

Principle 4: People respond to incentives.

Question 4

Suppose the government increases the gasoline tax by $1 per gallon. Which of the following is NOT a likely response by consumers?

Accepted Answer

Increasing the amount of gasoline purchased.

Question 5

If the benefit of repairing a car's transmission is $$1,300 and the cost is 1$$,400, what should a rational person do?

Accepted Answer

Do not repair the transmission because the marginal cost ($$1,400) exceeds the marginal benefit (1$$,300). $$1,400 \u003e 1$$,300$

Question 6

Which of the following is an example of a trade-off faced by society?

Accepted Answer

Spending more on the military (guns) to protect from foreign aggressors means less can be spent on consumer goods (butter) to raise the standard of living.

Question 7

Which equation correctly represents the opportunity cost of going to college for a year?

Accepted Answer

$$	ext{Opportunity Cost} = 	ext{Tuition} + 	ext{Books} + 	ext{Fees} + 	ext{Foregone Earnings}$$

Question 8

Which principle states that trade can make everyone better off?

Accepted Answer

Principle 5

Question 9

What is the main reason market economies are usually successful in organizing economic activity?

Accepted Answer

Decentralized decisions of many firms and households interacting in markets.

Question 10

According to Adam Smith's 'invisible hand' concept, how do prices function in a market economy?

Accepted Answer

Prices adjust to guide market participants to outcomes that often maximize the well-being of society as a whole.

Question 11

Which of the following is a source of market failure that may require government intervention?

Accepted Answer

Externality, such as pollution affecting bystanders.

Question 12

A country’s standard of living is most directly determined by which of the following?

Accepted Answer

The productivity of its workers, measured by the quantity of goods and services produced from each unit of labor input.

Question 13

If the government prints money at a faster rate, what is the likely long-run effect?

Accepted Answer

Increase in the overall level of prices (inflation).

Question 14

Which principle explains the short-run trade-off between inflation and unemployment?

Accepted Answer

Principle 10

Question 15

Which of the following best illustrates the concept of efficiency in economics?

Accepted Answer

Society gets the maximum benefits from its scarce resources.

Question 16

If a university reduces the price of a parking permit from $$250 to 10 $$per semester, what is the likely effect on the number of students desiring to park on campus?

Accepted Answer

The number will increase.

Question 17

Which of the following is NOT a role of government in improving market outcomes?

Accepted Answer

Setting all prices in the market.

Question 18

Which formula represents the marginal decision rule for rational people?

Accepted Answer

$$	ext{Take action if } 	ext{Marginal Benefit} \u003e 	ext{Marginal Cost}$$

Question 19

Which of the following is an example of an incentive that could have unintended consequences?

Accepted Answer

A tax on gasoline leading consumers to drive less and use public transportation.

Ten Principles of Economics: Foundations of Microeconomics

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