Question 1

If real salaries increase but nominal salaries do not, this means that

Accepted Answer

A)   the purchasing power of money has decreased.
B)   prices have not changed.
C)   prices have risen.
D)   prices have fallen. D

Question 2

What is an opportunity cost?

Accepted Answer

An opportunity cost is what you sacrifice to get something.

Question 3

If an economy is fully utilizing its resources, it can produce more of one product only if it

Accepted Answer

A)   doubles manufacturing of the product.
B)   produces less of another product.
C)   adds more people to the labor force.
D)   reduces the prices of the most expensive products. B

Question 4

Suppose that your tuition to attend college is $14,000 per year and you spend $5,000 per year on room and board. If you were working full time, you could earn $26,000 per year. What is your opportunity cost of attending college?

Accepted Answer

A)   $19,000
B)   $31,000
C)   $40,000
D)   $45,000

Question 5

Different people eat different amounts of food when they go to buffet restaurants, even though they all pay the same price. Explain how this relates to the marginal principle.

Accepted Answer

The answer of Different people eat different amounts of food...

Question 6

The marginal principle implies that an individual should produce or consume where

Accepted Answer

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

Question 7

Recall the Application about running a lawn-cutting business using solar-powered equipment to answer the following question(s).
-The current income you would sacrifice to start your own lawn-cutting business is part of the

Accepted Answer

A)   opportunity cost of invested funds.
B)   opportunity cost of starting a business.
C)   cost of doing business.
D)   present value of your initial investment.

Question 8

The additional cost resulting from a small increase in some activity is called the

Accepted Answer

A)   opportunity cost.
B)   marginal benefit.
C)   marginal cost.
D)   diminishing returns of the activity.

Question 9

The principle of voluntary exchange is based on the idea of

Accepted Answer

A)   making assumptions.
B)   isolating variables.
C)   thinking at the margin.
D)   rational self-interest.

Question 10

Figure 2.1
 
-Refer to Figure 2.1. What is the opportunity cost of increasing production of manufactured products from 500 tons to 600 tons per year?

Accepted Answer

A)   200 tons of agricultural products per year
B)   400 tons of agricultural products per year
C)   500 tons of agricultural products per year
D)   600 tons of agricultural products per year

Question 11

Table 2.5
 
-Comparing the minimum wages between 1974 and 2011 addresses the economic concept of

Accepted Answer

A)   the marginal principle.
B)   the principle of voluntary exchange.
C)   the principle of diminishing returns.
D)   the real-nominal principle.

Question 12

Table 2.2
 
-Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that we observe Krystal staying open 5 hours and her marginal benefit of staying open per hour is $36. If she is following the marginal principle, Krystal should

Accepted Answer

A)   stay open 1 more hour.
B)   stay open 2 more hours.
C)   stay open 1 fewer hour.
D)   stay open 2 fewer hours.

Question 13

Table 2.2
 
-Krystal runs a nail salon and needs to decide how many hours to stay open. Table 2.2 illustrates her marginal costs of staying open for each additional hour. Suppose that Krystal's marginal benefit of staying open per hour is $30. If she is following the marginal principle, how many hours should Krystal stay open?

Accepted Answer

A)   4 hours
B)   5 hours
C)   6 hours
D)   7 hours

Question 14

When Lonnie produces 1 pair of cowboy boots his costs total $300. When he produces 2 pairs of cowboy boots his total costs are $500. This means that Lonnie's marginal cost of producing the second pair of cowboy boots is $200.

Accepted Answer

A) True 
 B)False

Question 15

Suppose your bank pays you 5 percent interest per year on your savings account. If prices increase by 5 percent per year over that time, approximately how much real value do you gain by keeping $100 in the bank for a year?

Accepted Answer

A)   $0
B)   $1
C)   $3
D)   $6

Question 16

Table 2.4
 
-Refer to Table 2.4. The principle of diminishing returns sets in with the addition of the ________ tank of fertilizer.

Accepted Answer

A)   second
B)   third
C)   fourth
D)   fifth

Question 17

What is the nominal value of money?

Accepted Answer

A)   what can be purchased with the money
B)   discounts taken by multiple purchases
C)   savings by shopping on specific days of the week
D)   its actual face value

Question 18

What is a marginal benefit?

Accepted Answer

The answer of What is a marginal benefit?...

Question 19

Table 2.4
 
-Refer to Table 2.4. Increasing the tanks of fertilizer from 3 to 4 will increase the truckloads of potatoes by

Accepted Answer

A)   152.
B)   35.
C)   17.
D)   11.

Question 20

Tradeoffs involve an exchange of one thing for another because resources are limited and can be used in different ways.

Accepted Answer