Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?

e
C) the study of how business firms decide what inputs to hire and what outputs to produce
D) the study of how the federal government allocates tax dollars
(2). Resources are
a.
scarce for households but plentiful for economies.
b.
plentiful for households but scarce for economies.
c.
scarce for households and scarce for economies.
d.
plentiful for households and plentiful for economies.
(3). Economics deals primarily with the concept of
a.
scarcity.
b.
money.
c.
poverty.
d.
banking.
(4). Approximately what percentage of the world’s economies experience scarcity?
a.
10%
b.
40%
c.
85%
d.
100%
(5). The study of economics is primarily concerned with:A. keeping private businesses from losing money.B. demonstrating that capitalistic economies are superior to socialistic economies.C. choices that are made in seeking the best use of resources.D. determining the most equitable distribution of society’s output.
(6). Which one of the following expressions best states the idea of opportunity cost?A. “A penny saved is a penny earned.”B. “He who hesitates is lost.”C. “There is no such thing as a free lunch.”D. “All that glitters is not gold.”
(7). Macroeconomics approaches the study of economics from the viewpoint of:A. the entire economy.B. governmental units.C. the operation of specific product and resource markets.D. individual firms.
(8). Sophia 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
a.
people respond to incentives.
b.
rational people think at the margin.
c.
people face tradeoffs.
d.
improvements in efficiency sometimes come at the expense of equality.
(9). The terms equality and efficiency are similar in that they both refer to benefits to society. However they are different in that
a.
equality refers to uniform distribution of those benefits and efficiency refers to maximizing benefits from scarce resources.
b.
equality refers to maximizing benefits from scarce resources and efficiency refers to uniform distribution of those benefits.
c.
equality refers to everyone facing identical tradeoffs and efficiency refers to the opportunity cost of the benefits.
d.
equality refers to the opportunity cost of the benefits and efficiency refers to everyone facing identical tradeoffs.
(10). When the government redistributes income from the wealthy to the poor,
a.
efficiency is improved, but equality is not.
b.
both wealthy people and poor people benefit directly.
c.
people work less and produce fewer goods and services.
d.
the government collects more revenue in total.
(11). A likely effect of government policies that redistribute income and wealth from the wealthy to the poor is that those policies
a.
enhance equality.
b.
reduce efficiency.
c.
reduce the reward for working hard.
d.
All of the above are correct.
(12). In economics, the cost of something is
a.
the dollar amount of obtaining it.
b.
always measured in units of time given up to get it.
c.
what you give up to get it.
d.
often impossible to quantify, even in principle.
(13). Which of the following is correct concerning opportunity cost?
a.
Except to the extent that you pay more for them, opportunity costs should not include the cost of things you would have purchased anyway.
b.
To compute opportunity costs, you should subtract benefits from costs.
c.
Opportunity costs and the idea of trade-offs are not closely related.
d.
Rational people should compare various options without considering opportunity costs.
(14). The opportunity cost of going to college is
a.
the total spent on food, clothing, books, transportation, tuition, lodging, and other expenses.
b.
the value of the best opportunity a student gives up to attend college.
c.
zero for students who are fortunate enough to have all of their college expenses paid by someone else.
d.
zero, since a college education will allow a student to earn a larger income after graduation.
(15). Table 2-3
Production Possibilities for Libraryland
Books
Magazines
400
0
300
200
200
350
100
450
0
500
Refer to Table 2-3. What is the opportunity cost to Libraryland of increasing the production of books from 100 to 200?
a.
100 magazines
b.
150 magazines
c.
200 magazines
d.
350 magazines
()
Figure 1-1
Peru’s Production Possibilities Frontier
(16). Refer to Figure 1-1. The fact that the line slopes downward reflects the fact that
a.
for Peru, it is more costly to produce emeralds than it is to produce rubies.
b.
Peru will produce more emeralds and fewer rubies as time goes by.
c.
Peru faces a tradeoff between producing emeralds and producing rubies.
d.
Peru should specialize in producing rubies.
(17).Figure 1-1. If the production possibilities frontier shown is for 40 hours of production, then how long does it take Peru to make one emerald?
a.
1/6 hour
b.
1/5 hour
c.
5 hours
d.
6 hours
(18).Figure 1-1 If the production possibilities frontier shown is for 40 hours of production, then how long does it take Peru to make one rubies?
a.
1/6 hour
b.
1/5 hour
c.
5 hours
d.
6 hours
(19). Alexi and Tony own a food truck that serves only two items, street tacos and Cuban sandwiches. As shown in the table. Alexi can make 80 street tacos per hour but only 20 Cuban sandwiches. Tony is a bit faster and can make 100 street tacos or 30 Cuban sandwiches in an hour. Alexi and Tony can sell all the street tacos and Cuban sandwiches that they are able to produce.
Output per hour
Street Tacos
Cuban sandwiches
Alexi
80
20
Tony
100
30
From above table, who has a comparative advantage in the production of street tacos?
Alexi
Tony
(20). Refer to Table 1-2. Which country has the comparative advantage in the production of cheese.
a.
England
b.
Spain
c.
both of them
d.
neither of them.
Table 1-2
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.
Labor Hours Needed
to Make 1 Unit of
Number of Units
Produced in 40 Hours
Cheese
Bread
Cheese
Bread
England
8
4
100
200
Spain
1
4
80
20
The following is analytical questions:
2. The only two countries in the world, Alpha and Omega, face the following production possibilities frontiers. ( 30 points)
Alpha’s Production Possibilities Frontier
Omega’s Production Possibilities Frontier
a.
Assume that each country decides to use half of its resources in the production of each good. Write down these combination of peanuts and popcorn for each country.
b.
If these countries choose not to trade, what would be the total world production of popcorn and peanuts?
c.
Which country has a comparative advantage in peanuts. Which country has a comparative advantage in popcorn.
3. Define opportunity cost. What is the opportunity cost to you of attending college? What was your opportunity cost of coming to class today?