Q&A Hero

Q: If additional units of a good could be produced at a constant opportunity cost, the production possibility frontier would be bowed outward (concave).

Q: An increase in the labor force shifts the production possibility frontier inwards over time.

Q: Any output combination outside a production possibility frontier is associated with unused or underutilized resources.

Q: Consider a country that produces only two goods: kayaks and coconuts. Suppose it is possible for this country to increase its production of kayaks without producing fewer coconuts. In this case, its current output combination is efficient.

Q: If a country is producing efficiently and is on the production possibilities frontier, the only way to produce more of one good is to produce less of the other.

Q: A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.

Q: The opportunity cost of going to an outdoor music festival is A) the enjoyment you receive from going to the festival. B) the value of the time spent at the festival. C) equal to the highest value of an alternative use of the time and money spent on the festival. D) zero because there is no overhead costs for an outdoor festival. E) the cost of the festival ticket only.

Q: Suppose your expenses for this term are as follows: tuition: $10,000, room and board: $6,000, books and other educational supplies: $1,000. Further, during the term, you can only work part-time and earn $8,000 instead of your full-time salary of $20,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? A) $11,000 B) $17,000 C) $23,000 D) $29,000

Q: Table 2-3Production Choices for Dina's DinerChoiceQuantity of Sliders ProducedQuantity of Hot Wings ProducedA1600B12050C80100D40150E0200Refer to Table 2-3. Dina faces ________ opportunity costs in the production of sliders and hot wings.A) increasingB) decreasingC) constantD) negative

Q: Table 2-3Production Choices for Dina's DinerChoiceQuantity of Sliders ProducedQuantity of Hot Wings ProducedA1600B12050C80100D40150E0200Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 120 sliders and 100 hot wings would appearA) along Dina's production possibilities frontier.B) inside Dina's production possibilities frontier.C) outside Dina's production possibilities frontier.D) at the vertical intercept of Dina's production possibilities frontier.

Q: Table 2-3Production Choices for Dina's DinerChoiceQuantity of Sliders ProducedQuantity of Hot Wings ProducedA1600B12050C80100D40150E0200Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 80 sliders and 50 hot wings would appearA) along Dina's production possibilities frontier.B) inside Dina's production possibilities frontier.C) outside Dina's production possibilities frontier.D) at the vertical intercept of Dina's production possibilities frontier.

Q: Table 2-3Production Choices for Dina's DinerChoiceQuantity of Sliders ProducedQuantity of Hot Wings ProducedA1600B12050C80100D40150E0200Refer to Table 2-3. Assume Dina's Diner only produces sliders and hot wings. A combination of 80 sliders and 100 hot wings would appearA) along Dina's production possibilities frontier.B) inside Dina's production possibilities frontier.C) outside Dina's production possibilities frontier.D) at the vertical intercept of Dina's production possibilities frontier.

Q: Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. Refer to Figure 2-8. Suppose Vidalia is currently producing 120 dozen roses per period. How many orchids is it also producing, assuming that resources are fully utilized? A) 20 dozen orchids B) 32 dozen orchids C) 44 dozen orchids D) 68 dozen orchids

Q: Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. Refer to Figure 2-8. Suppose Vidalia is currently producing 60 dozen orchids per period. How many roses is it also producing, assuming that resources are fully utilized? A) 40 dozen roses B) 50 dozen roses C) 60 dozen roses D) 100 dozen roses

Q: Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. Refer to Figure 2-8. What is the opportunity cost of 100 dozen roses? A) 0.8 dozen orchids B) 5 dozen orchids C) 40 dozen orchids D) 80 dozen orchids

Q: Figure 2-8 Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids. Refer to Figure 2-8. What is the opportunity cost of 80 dozen orchids? A) 0 roses B) 2.5 dozen roses C) 40 dozen roses D) 200 dozen roses

Q: Sarita can bake either a combination of 25 cakes and 15 pies or a combination of 10 cakes and 20 pies. If she now bakes 10 cakes and 20 pies, what is the opportunity cost of baking an additional 15 cakes? A) 5 pies B) 10 pies C) 15 pies D) 20 pies

Q: Figure 2-7 Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Refer to Figure 2-7. Assume that in 2014, Mercedes reopened one of its factories after an extensive remodelling which now allows for the production of both types of vehicles. This is best represented by the A) movement from E to F in Graph A. B) movement from H to J in Graph B. C) movement from L to K in Graph C. D) movement from J to G in Graph B.

Q: Figure 2-7 Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Refer to Figure 2-7. Assume that in response to changing consumer demands, Mercedes cuts back on the production of electric vehicles and increased its production of gasoline-powered vehicles. This strategy is best represented by the A) movement from F to E in Graph A. B) movement from G to J in Graph B. C) movement from L to K in Graph C. D) movement from J to H in Graph B.

Q: Figure 2-7 Mercedes Benz recently decided to introduce its B-class automobile in the U.S. market, an electric car that is has designed and developed in a partnership with Tesla Motors. Assume Mercedes Benz chooses to produce both electric-engine vehicles and gasoline-engine vehicles. Figure 2-7 shows changes to its production possibilities frontier in response to new developments and different strategic production decisions. Refer to Figure 2-7. Assume a technological advancement greatly reduces the cost to produce electric-engine vehicles. This is best represented by the A) movement from E to F in Graph A. B) movement from G to H in Graph B. C) movement from K to L in Graph C. D) movement from H to J in Graph B.

Q: The opportunity cost of taking a semester-long economics class is A) the cost of tuition and fees only. B) the value of the time spent in the classroom. C) zero because there is no admission charged if you are enrolled in the course. D) equal to the highest value of an alternative use of the time and money spent on the class. E) the knowledge and enjoyment you receive from attending the class.

Q: Suppose your expenses for this term are as follows: tuition: $28,000, room and board: $9,000, books and other educational supplies: $2,500. Further, during the term, you can only work part-time and earn $16,000 instead of your full-time salary of $42,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? A) $36,500 B) $56,500 C) $65,500 D) $72,500

Q: Suppose your expenses for this term are as follows: tuition: $12,000, room and board: $6,500, books and other educational supplies: $1,500. Further, during the term, you can only work part-time and earn $3,500 instead of your full-time salary of $14,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? A) $13,500 B) $20,000 C) $24,000 D) $30,500

Q: In a report made to the U.S. Congress in 2001, the National Academy of Sciences cautioned that if fuel economy encourages the production of smaller and lighter cars, "Some additional traffic fatalities would be expected." This statement suggests that A) U.S. auto manufacturers are more concerned about producing fuel efficient cars to compete with their Japanese and South Korean rivals than about consumer safety. B) there is a tradeoff between safety and fuel economy. C) society should value safety more highly than fuel economy. D) society should value fuel economy more highly than consumer safety because of the long term environment benefits generated by less gasoline use.

Q: Figure 2-6 Refer to Figure 2-6. If the economy is currently producing at point E, what is the opportunity cost of moving to point D? A) 13 thousand hammers B) 10 thousand hammers C) 8 thousand wrenches D) 0 wrenches

Q: Figure 2-6 Refer to Figure 2-6. If the economy is currently producing at point E, what is the opportunity cost of moving to point B? A) 13 thousand hammers B) 10 thousand hammers C) 30 thousand wrenches D) 0 wrenches

Q: Figure 2-6 Refer to Figure 2-6. If the economy is currently producing at point D, what is the opportunity cost of moving to point B? A) 8 thousand wrenches B) 23 thousand hammers C) 30 thousand wrenches D) 0 hammers

Q: Figure 2-6 Refer to Figure 2-6. If the economy is currently producing at point C, what is the opportunity cost of moving to point B? A) 10 thousand wrenches B) 13 thousand hammers C) 30 thousand wrenches D) 23 thousand hammers

Q: Figure 2-6 Refer to Figure 2-6. If the economy is currently producing at point A, what is the opportunity cost of moving to point B? A) 8 thousand wrenches B) 6 thousand hammers C) 30 thousand wrenches D) 23 thousand hammers

Q: Figure 2-5 Refer to Figure 2-5. If the economy is currently producing at point X, what is the opportunity cost of moving to point Y? A) 5 million tons of steel B) 9 million tons of paper C) 5 million tons of paper D) 14 million tons of steel

Q: Figure 2-5 Refer to Figure 2-5. If the economy is currently producing at point W, what is the opportunity cost of moving to point X? A) 3 million tons of steel B) 19 million tons of steel C) 5 million tons of paper D) 9 million tons of paper

Q: Figure 2-5 Refer to Figure 2-5. If the economy is currently producing at point Y, what is the opportunity cost of moving to point W? A) 2 million tons of steel B) zero C) 9 million tons of paper D) 16 million tons of paper

Q: According to the production possibility model, if more resources are allocated to the production of physical and human capital, then which of the following is likely to happen? A) Fewer goods will be produced for consumption today. B) The production possibilities frontier will be shift inward in the future. C) Future economic growth will decline. D) The country's total production will fall.

Q: If society decides it wants more of one good and all resources are fully utilized, then A) it is unable to do this unless technology advances. B) additional resource supplies will have to be found. C) it has to give up some of another good and incur some opportunity costs. D) more unemployment will occur.

Q: Suppose there is no unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true? A) It can only achieve this with an advance in technology. B) It can increase output without giving up another good. C) It can only achieve this with an increase in resource supplies. D) It will have to give up production and consumption of some other good.

Q: The Great Depression of the 1930s with a large number of workers and factories unemployed would be represented in a production possibilities frontier graph by A) a point inside the frontier. B) a point outside the frontier. C) a point on the frontier. D) an intercept on either the vertical or the horizontal axis.

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. Consider the following events: a. an increase in the patent protection period to 30 years b. an increase of a nation's capital stock c. an improved property rights system Which of the events listed above could cause a movement from V to W? A) a only B) a and b only C) a and c only D) b and c only E) a, b, and c

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. Consider the following events: a. an increase in the unemployment rate b. general technological advancement c. a decrease in consumer wealth Which of the events listed above could cause a movement from X to V? A) a only B) a and b only C) b and c only D) a, b, and c

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. Consider the following movements: a. from point V to point W b. from point W to point Y c. from point Y to point Z Which of the movements listed above represents advancements in technology with respect to only plastic production? A) a, b, and c B) b and c only C) b only D) c only

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. Consider the following events: a. a decrease in the unemployment rate b. an increase in a nation's money supply c. an influx of immigrant workers Which of the events listed above could cause a movement from X to Z? A) a, b and c B) a and b only C) a and c only D) a only E) c only

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. A movement from ________ is the result of negative technological change in plastic production. A) V to X B) X to W C) W to Z D) Z to Y

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. A movement from ________ could occur because of an influx of immigrant labor. A) W to V B) X to W C) W to Z D) Y to W

Q: Figure 2-4 Figure 2-4 shows various points on three different production possibilities frontiers for a nation. Refer to Figure 2-4. Consider the following events: a. a reduction in the patent protection period to no more than 2 years b. a war that destroys a substantial portion of a nation's capital stock c. the lack of secure and enforceable property rights system Which of the events listed above could cause a movement from W to V? A) a only B) a and b only C) a and c only D) b and c only E) a, b, and c

Q: What is a marginal benefit?

Q: What is an economic model?

Q: Assume that a doctor can earn an additional $20,000 of revenue each year from keeping his office open for one additional hour per week. What must the additional cost of keeping the office open this additional hour per week be to make staying open for the extra hour economically rational?

Q: What is meant by the statement that "optimal decisions are made at the margin"?

Q: Explain the economic idea that "people respond to incentives."

Q: Explain the economic assumption that "people are rational."

Q: Suppose the extra cost to a doctor of keeping his office open on Saturdays is $1,200. Then, the doctor should stay open on Saturdays if keeping the office open brings in additional revenue of $1,200 or more.

Q: If it costs Danitra $225 to create 4 necklaces and $275 to create 5 necklaces, then $50 is the marginal cost of producing the 5th necklace.

Q: Marginal benefit refers to the additional benefit that your activity provides to you.

Q: The additional cost to a producer of hiring an additional unit of labor is called the marginal cost.

Q: The term "market" refers to trading arrangements by which buyers and sellers come together.

Q: Even if the population declines, scarcity will still exist.

Q: All economic questions arise from the fact that resources are unlimited.

Q: Suppose the extra cost for a doctor to keep his office open for one extra hour is $200. Then, the doctor should stay open for the extra hour even if he can generate additional revenue of $200 for that hour.

Q: If it costs Sinclair $300 to produce 3 suede jackets and $420 to produce 4 suede jackets, then the difference of $120 is the marginal cost of producing the 4th suede jacket.

Q: Optimal decisions are made at the point where marginal cost equals zero.

Q: The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit.

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

Q: Scarcity is a problem that will eventually disappear as technology advances.

Q: Scarcity refers to a situation in which unlimited wants exceed the limited resources available to fulfill those wants.

Q: Damian shares a small food truck with his sister. His share of the expenses is $500 per month. He has decided to get his own, newer food truck which he will not have to share with anyone. His expenses for the newer truck are $1,400 per month. Damian is as rational as any other person. As an economics major, you rightly conclude that A) Damian cannot afford the newer truck and will have to go back to sharing a truck with his sister. B) Damian figures that the additional benefit of having his own truck (as opposed to sharing) is at least $900. C) Damian figures that the benefit of having his own truck (as opposed to sharing) is at least $1,400. D) the cost of having one's own truck outweighs the benefits.

Q: Table 1-3Hours OpenTotal Revenue (dollars)1$7021203160418452006210Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of hours the store is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.Refer to Table 1-3. What is Santiago's marginal cost if he decides to stay open for two hours instead of one hour?A) $18B) $36C) $38D) $102

Q: Table 1-3Hours OpenTotal Revenue (dollars)1$7021203160418452006210Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of hours the store is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.Refer to Table 1-3. What is Santiago's marginal benefit if he decides to stay open for two hours instead of one hour?A) $40B) $50C) $120D) $190

Q: Table 1-3Hours OpenTotal Revenue (dollars)1$7021203160418452006210Santiago runs a comic book store in the town of East Arbor. He is debating whether he should extend his hours of operation. Santiago figures that his sales revenue will depend on the number of hours the store is open as shown in the table above. He would have to hire a worker for those hours at a wage rate of $18 per hour.Refer to Table 1-3. Using marginal analysis, determine how many hours should Santiago extend his store's hours of operations?A) 2 hoursB) 3 hoursC) 4 hoursD) 5 hoursE) 6 hours

Q: Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats." Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and if so by how much? A) Its profit will be $1,100 higher. B) Its profit will be $100 higher. C) Its profit will be $100 lower. D) Its profit will be $1,000 lower.

Q: Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats." Refer to Scenario 1-2. Using marginal analysis terminology, another economic term for the incremental cost of producing the last 300 hats is A) marginal cost. B) operating cost. C) explicit cost. D) Any of the above terms are correct.

Q: Scenario 1-2 Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats." Refer to Scenario 1-2. Using marginal analysis terminology, another economic term for the incremental revenue received from the sale of the last 300 hats is A) gross earnings. B) marginal revenue. C) sales revenue. D) gross profit.

Q: Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What should he do? A) He should sell the machine now to make the most profit. B) It does not matter what he does; he is going to take a loss on his project. C) He should rewire the machine, complete the task and then sell the machine. D) He should have never purchased the machine because he has already spent too much time on it and has not been paid for that time.

Q: Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What is the marginal cost of completing the task? A) $300 B) $800 C) $1,100 D) $1,400

Q: Pookie's Pinball Palace restores old Pinball machines. Pookie has just spent $300 purchasing and cleaning a 1960s-era machine which he expects to sell for $2,000 once he is finished with the restoration. After having spent $300, Pookie discovers that he will need to rewire the entire machine at a cost of $1,100 in order to finish the restoration. Alternatively, he can sell the machine "as is" now for $1,000. What is his marginal benefit if he sells the machine "as is" now? A) $300 B) $900 C) $1,000 D) The marginal benefit cannot be determined.

Q: Which of the following is an example of a "how much" decision? A) Dinah's Diner is only open for breakfast and lunch. Dinah is trying to decide whether to open for dinner as well. B) Zander has torn up his front yard and is debating whether to plant grass or install a rock garden. C) You received a nice birthday check from your grandmother and are deciding on whether to spend it on a trip to New York or a trip to San Francisco. D) Sergio quit his job to go back to school full time.

Q: The ________ the sale of an additional unit of a product is a marginal benefit to the firm. A) revenue received from B) extra cost of C) total value of D) sales tax on

Q: A restaurant sells a large soft drink at a fixed price of $1.79. A term used by economists to describe the money received from the sale of an additional large soft drink is A) marginal revenue. B) gross earnings. C) pure profit. D) net benefit.

Q: Consider the following statements: a. Consumers buy more MP3 players from an electronics store that sells MP3 players at a lower price than other rival electronics stores in the area. b. Schools take steps to increase security since they believe it is more costly to allow vandalism than to hire additional security guards. c. Citrus growers produce more oranges when the selling price of oranges falls. Which of the above statements demonstrates that economic agents respond to incentives? A) a only. B) b only. C) c only. D) a and b. E) a, b, and c.

Q: If the marginal cost of keeping a doctor's office open one additional hour per day is $200, then the doctor should keep the office open for one extra hour A) only if the marginal benefit she receives is greater than $200 plus an acceptable profit margin. B) as long as the marginal benefit she receives is just equal to or greater than $200. C) as long as the marginal cost does not rise. D) until the marginal benefit she receives reaches zero.

Q: Soo Jin shares a one-bedroom apartment with her classmate. Her share of the rent is $700 per month. She is considering moving to a studio apartment which she will not have to share with anyone. The studio apartment rents for $950 per month. Recently, you ran into Soo Jin on campus and she tells you that she has moved into the studio apartment. Soo Jin is as rational as any other person. As an economics major, you rightly conclude that A) Soo Jin did not have a choice; her roommate was a slob. B) Soo Jin figures that the additional benefit of having her own place (as opposed to sharing) is at least $250. C) Soo Jin figures that the benefit of having her own place (as opposed to sharing) is at least $950. D) the cost of having one's own space outweighs the benefits.

Q: Table 1-2Hours OpenTotal Revenue (dollars)1$2524537049051056110Thuy Anh runs a small flower shop in the town of Florabunda. She is debating whether she should extend her hours of operation. Thuy Anh figures that her sales revenue will depend on the number of hours the flower shop is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $16 per hour.Refer to Table 1-2. What is Thuy Anh's marginal cost if she decides to stay open for three hours instead of two hours?A) $0B) $16C) $25D) $32E) $45