Question 1

The face value of money or income is called its _______ value.

Accepted Answer

A)  real 
B)  nominal 
C)  marginal 
D)  external 
A)  real 
B)  nominal 
C)  marginal 
D)  external

Question 2

Mark quit his job as a salesman where he made $43,000 per year to start his own t- shirt making business. His business expenses are $6,000 per year on rent, $12,000 per year on supplies, and $4,000 per year on part- time help. As for his personal expenses, his apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year. What is Mark's opportunity cost of running the business?

Accepted Answer

A)  $65,000 
B)  $43,000 
C)  $71,000 
D)  $57,000 
A)  $65,000 
B)  $43,000 
C)  $71,000 
D)  $57,000

Question 3

If a company's total costs per day increase from $500 to $600 by adding another worker, but its additional benefits are $150, it is sensible to add that additional worker.

Accepted Answer

A) True 
 B)False

Question 4

The marginal principle states that "we should increase the level of an activity as long as:

Accepted Answer

A)  its marginal cost exceeds its marginal benefit." 
B)  its total benefit exceeds its total cost." 
C)  its total cost exceeds its total benefit." 
D)  its marginal benefit exceeds it marginal cost." 
A)  its marginal cost exceeds its marginal benefit." 
B)  its total benefit exceeds its total cost." 
C)  its total cost exceeds its total benefit." 
D)  its marginal benefit exceeds it marginal cost."

Question 5

Figure 2.4
-Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?

Accepted Answer

A)  $16 
B)  $32 
C)  $48 
D)  $24 
A)  $16 
B)  $32 
C)  $48 
D)  $24

Question 6

The notion of opportunity cost allows the measurement of tradeoffs.

Accepted Answer

A) True 
 B)False

Question 7

According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:

Accepted Answer

A)  double too. 
B)  more than double. 
C)  less than double. 
D)  none of the above 
A)  double too. 
B)  more than double. 
C)  less than double. 
D)  none of the above

Question 8

Figure 2.1
-Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

Accepted Answer

A)  the production of factory goods 
B)  the price of produce 
C)  how much people can purchase 
D)  the wages earned by farm workers 
A)  the production of factory goods 
B)  the price of produce 
C)  how much people can purchase 
D)  the wages earned by farm workers

Question 9

When referring to "marginal" changes, the economic focus is on:

Accepted Answer

A)  graduated changes on the high end. 
B)  changes that affect only a few people or products. 
C)  small or incremental changes. 
D)  large changes on the low end. 
A)  graduated changes on the high end. 
B)  changes that affect only a few people or products. 
C)  small or incremental changes. 
D)  large changes on the low end.

Question 10

Recall Application 5, "The Declining Real Minimum Wage," to answer the following questions:
-According to the application, from 1974 to 2007 as the nominal minimum wage rose from $2 to
$5.85, the real minimum wage fell.

Accepted Answer

A) True 
 B)False

Question 11

You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

Accepted Answer

A)  good news, because it makes the real value of your mortgage payments decrease 
B)  bad news, because it makes the nominal value of your mortgage payments increase 
C)  bad news, because it makes the real value of your mortgage payments increase 
D)  bad news, because inflation hurts everyone 
A)  good news, because it makes the real value of your mortgage payments decrease 
B)  bad news, because it makes the nominal value of your mortgage payments increase 
C)  bad news, because it makes the real value of your mortgage payments increase 
D)  bad news, because inflation hurts everyone

Question 12

According to the marginal principle, an individual will do best by producing or consuming where:

Accepted Answer

A)  marginal benefit is less than marginal cost. 
B)  total benefit equals total cost. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit exceeds total benefits. 
A)  marginal benefit is less than marginal cost. 
B)  total benefit equals total cost. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit exceeds total benefits.

Question 13

The opportunity cost of getting a master's degree in engineering equals the tuition plus the cost of books.

Accepted Answer

A) True 
 B)False

Question 14

The principle of opportunity cost:

Accepted Answer

A)  is only relevant in economics. 
B)  is more relevant for firms than for individuals. 
C)  only refers to monetary payments. 
D)  is applicable to all decision- making. 
A)  is only relevant in economics. 
B)  is more relevant for firms than for individuals. 
C)  only refers to monetary payments. 
D)  is applicable to all decision- making.

Question 15

Jessica, aged three, decides to dress up like Sleeping Beauty for Halloween. What is her opportunity cost of this decision?

Accepted Answer

A)  zero, because three- year- olds do not have opportunity costs 
B)  the cost of the costume 
C)  the fact that she can't dress up like Barbie, her second choice 
D)  impossible to say, because Jessica does not understand what an opportunity cost is 
A)  zero, because three- year- olds do not have opportunity costs 
B)  the cost of the costume 
C)  the fact that she can't dress up like Barbie, her second choice 
D)  impossible to say, because Jessica does not understand what an opportunity cost is

Question 16

Consider a firm that is trying to determine how many hours to remain open in a day. How would the firm make this decision?

Accepted Answer

The firm would continue to stay open as

Question 17

According to the marginal principle, a rational individual should not undertake an economic activity if the:

Accepted Answer

A)  total benefit equals total cost. 
B)  marginal benefit is less than marginal cost. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit exceeds marginal cost. 
A)  total benefit equals total cost. 
B)  marginal benefit is less than marginal cost. 
C)  marginal benefit equals marginal cost. 
D)  marginal benefit exceeds marginal cost.

Question 18

Figure 2.2
-Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Accepted Answer

A)  the sum of the opportunity costs of the first three highways built. 
B)  less than the opportunity cost of the third new highway. 
C)  the same as the opportunity cost of the third new highway. 
D)  greater than the opportunity cost of the third new highway. 
A)  the sum of the opportunity costs of the first three highways built. 
B)  less than the opportunity cost of the third new highway. 
C)  the same as the opportunity cost of the third new highway. 
D)  greater than the opportunity cost of the third new highway.

Question 19

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions:
-As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre or production exhibited:

Accepted Answer

A)  diminishing returns to fertilizer. 
B)  increasing returns to fertilizer. 
C)  constant returns to land. 
D)  decreasing returns to land. 
A)  diminishing returns to fertilizer. 
B)  increasing returns to fertilizer. 
C)  constant returns to land. 
D)  decreasing returns to land.

Question 20

By making acquisitions, resources are used that could have been used to _______.

Accepted Answer

acquire so

The face value of money or income is called its _______ value.

If a company's total costs per day increase from $500 to $600 by adding another worker, but its additional benefits are $150, it is sensible to add that additional worker.

The marginal principle states that "we should increase the level of an activity as long as:

Figure 2.4 -Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?

The notion of opportunity cost allows the measurement of tradeoffs.

According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:

Figure 2.1 -Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

When referring to "marginal" changes, the economic focus is on:

Recall Application 5, "The Declining Real Minimum Wage," to answer the following questions: -According to the application, from 1974 to 2007 as the nominal minimum wage rose from $2 to $5.85, the real minimum wage fell.

You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

According to the marginal principle, an individual will do best by producing or consuming where:

The opportunity cost of getting a master's degree in engineering equals the tuition plus the cost of books.

The principle of opportunity cost:

Jessica, aged three, decides to dress up like Sleeping Beauty for Halloween. What is her opportunity cost of this decision?

Consider a firm that is trying to determine how many hours to remain open in a day. How would the firm make this decision?

According to the marginal principle, a rational individual should not undertake an economic activity if the:

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions: -As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre or production exhibited:

By making acquisitions, resources are used that could have been used to _______.

Introduction: What Is Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters

Exam 2: The Key Principles of Economics

The face value of money or income is called its _______ value.

If a company's total costs per day increase from $500 to $600 by adding another worker, but its additional benefits are $150, it is sensible to add that additional worker.

The marginal principle states that "we should increase the level of an activity as long as:

Figure 2.4 -Joe runs a business and needs to decide how many hours to stay open. Figure 2.4 illustrates his marginal benefit of staying open for each additional hour. Suppose that we observe Joe staying open 6 hours per day. If he is following the marginal principle, what must his marginal cost be?

The notion of opportunity cost allows the measurement of tradeoffs.

According to the principle of diminishing returns, if all factors of production but one are held constant and if that one factor is doubled, then eventually output will most likely:

Figure 2.1 -Referring to Figure 2.1, if you increase the production of farm goods, what other area is affected?

When referring to "marginal" changes, the economic focus is on:

Recall Application 5, "The Declining Real Minimum Wage," to answer the following questions: -According to the application, from 1974 to 2007 as the nominal minimum wage rose from $2 to $5.85, the real minimum wage fell.

You borrow money to buy a house in 2006 at a fixed interest rate of 6.5%. By 2009, the inflation rate has risen to 8.5%. Considering only your mortgage, is inflation good news or bad news for you?

According to the marginal principle, an individual will do best by producing or consuming where:

The opportunity cost of getting a master's degree in engineering equals the tuition plus the cost of books.

The principle of opportunity cost:

Jessica, aged three, decides to dress up like Sleeping Beauty for Halloween. What is her opportunity cost of this decision?

Consider a firm that is trying to determine how many hours to remain open in a day. How would the firm make this decision?

According to the marginal principle, a rational individual should not undertake an economic activity if the:

Figure 2.2 -Figure 2.2 presents a production possibilities curve for a country that can either produce highways or provide people with medical care in a given year. The opportunity cost of the fourth new highway built in a year is:

Recall Application 4, "Fertilizer and Crop Yields" to answer the following questions: -As bags of nitrogen applied went from 0 to 1 to 2 to 3 to 4, crop yield went from 85 to 120 to 135 to 144 to 147 bushels per acre or production exhibited:

By making acquisitions, resources are used that could have been used to _______.

Introduction: What Is Economics

Exchange and Markets

Demand, Supply, and Market Equilibrium

Measuring a Nations Production and Income

Unemployment and Inflation

The Economy at Full Employment

Why Do Economies Grow

Aggregate Demand and Aggregate Supply

Fiscal Policy

The Income-Expenditure Model

Investment and Financial Markets

Money and the Banking System

The Federal Reserve and Monetary Policy

Modern Macroeconomics: From the Short Run to the Long Run

The Dynamics of Inflation and Unemployment

Macroeconomic Policy Debates

International Trade and Public Policy

The World of International Finance

Filters