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Exam 1: Thinking Like an Economist

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Question 31

Multiple Choice

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Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. The opportunity cost of attending State College is:

A) $30,000
B) $20,000
C) $15,000
D) $10,000

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Question 32

Multiple Choice

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Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is that wants are:

A) limited, resources are limited, and thus choices must be made.
B) unlimited, resources are limited, and thus choices must be made.
C) unlimited, resources are limited to some but not to others, and thus some people must make choices.
D) unlimited, resources are limited, and thus government needs to do more.

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Question 33

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Jack has a ticket to see Bo Bice for which he paid $30 yesterday. He takes an unpaid day off from work to get ready for the concert. When he arrives at the concert, five different people offer him $70 for his ticket. Jack decides to keep his ticket. The cost to Jack of seeing Bo Bice is:

The central concern of economics is:

According to the incentive principle:

If one fails to account for implicit costs in decision making, then applying the cost-benefit rule will be flawed because:

Josh wants to go to the football game this weekend, but he has a paper due on Monday. It will take him the whole weekend to write the paper. Josh decided to stay home and work on the paper. According to the scarcity principle, the reason Josh didn't go to the game is that:

The cost-benefit model used by economists is:

Jen spends her afternoon at the beach, paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is:

The average benefit of an activity is the:

Your classmates from the University of Chicago are planning to go to Miami for spring break, and you are undecided about whether you should go with them. The round-trip airfares are $600, but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare. All other costs for the vacation are exactly $900. The most you would be willing to pay for the trip is $1400. Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation, which your parents are forcing you to attend. The Chicago-Atlanta round-trip airfares are $450. If you use the frequent-flyer coupon to fly to Atlanta, would you get any economic surplus by making the trip?

Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45, respectively. She dislikes both equally and they both take the same amount of time. Janie will therefore choose to _________ because the economic surplus is ________.

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, it is a good offer, but if he wants to buy something with a price of $500, it is not a good offer. This is an example of:

You had to pay $600 (non-refundable) for your meal plan for the Fall semester, which gives you up to 150 meals. If you eat all of the meals, your average cost for a meal equals:

The following table shows the relationship between the speed of a computer's CPU and the benefits and costs. Assume that all other features of the computer are the same, i.e., CPU speed is the only source of variation. $\begin{array} { | l | l | l | l | l | } \hline \text { CPU Mhz } & \text { Total Benefit } & \text { Marginal Benefit } & \text { Total Cost } & \text { Marginal Cost } \\\hline 600 & \$ 1,000 & & \$ 900 & \\\hline 700 & \$ 1,500 & & & \$ 100 \\\hline 800 & & \$ 400 & \$ 1,400 & \\\hline 900 & \$ 2,200 & & \$ 1,900 & \\\hline 1,000 & \$ 2,400 & & & \$ 600 \\\hline\end{array}$ The marginal cost of upgrading from a 700 to an 800 Mhz computer is:

Curly used his frequent flyer miles to fly to visit Moe. Curly told Moe that it didn't cost him anything to visit. Is Curly correct?

Some states have started giving tax credits to homeowners who install solar panels. This is an example of:

The impact of government policies on the building of new roads and highways would be studied in the field of:

Forest is a mountain man living in complete isolation in Montana. He is completely self-sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer:

You had to pay $600 (non-refundable) for your meal plan for Fall semester, which gives you up to 150 meals. If you eat only 100 meals, your marginal cost for the 100^th meal is: