1.
Sort the following incentives by whether they are positive or negative.
Items (6 items)
(Drag and drop into the appropriate area below)
Categories
• P Incentives
o A reward offered for the return of a lost item
o Your instructor offers extra credit for attending an event outside of
class
o The government offers a tax credit for donating to recognized charities
• N Incentives
o A parking ticket given for parking in a no-parking zone
o The government taxes the sale of cigarettes
o Your instructor institutes an attendance policy that drops your grade
if you miss more than two classes
2.
Suppose your friend can obtain concert tickets for $100 each, but you can’t
get them for less than $300 each. Your friend sells the tickets to you for $200
each. Which of the five foundations of economics best describes the result of
this activity?
Choose one: A. marginal thinking B. incentives C. opportunity cost
D. trade creates value E. trade-offs
3.
Although you have an exam tomorrow, you are considering watching one more
episode of your favorite TV show. You will choose to stay on the couch if
Choose one: A. the marginal benefit of watching one more episode of your
favorite TV show outweighs the marginal cost. B. the marginal benefit
of watching one more episode of your favorite TV show exactly equals the
marginal cost. C. watching one more episode of your favorite TV show is
guaranteed to be fun, so the marginal benefit is high. D. watching one more
episode of your favorite TV show is free, so the marginal cost is zero.
4.
Sam has two options this weekend. He could work at his job and earn $10 per
hour for three hours, or he could go to an exhibit at the art museum for that
three hours. A ticket for the event costs $30.
If you include the opportunity cost, how much did the event
costSam? $
60.00
5.
Buying and selling textbooks are two separate decisions made at the margin.
Textbooks create value both when they are bought and when they are sold.
Think about your decision to buy the textbook for this course. You paid
$225 for the book, but you would have been willing to pay $500 to use the
book for the semester. Suppose that at the end of the semester you could
keep your textbook or sell it back to the bookstore. Once you have completed
the course, the book is worth only $50 to you. The bookstore will pay you 50%
of the original $225.
How much total value have you gained? $
337.50
6.
Consider the list of economic questions and issues below. Which are
microeconomic issues, and which are macroeconomic issues?
Place each item in the correct column.
Items (8 items)
(Drag and drop into the appropriate area below)
Categories
• M
o Should the government pass a jobs bill to stimulate the economy?
o Why does the unemployment rate increase during a recession?
o How much will the economy grow next year?
o What happens to prices when the government increases the money
supply?
• M
o How does Apple decide how many iPads to produce?
o Which company’s stocks should your mother buy?
o Why does the price of gasoline increase during the summer?
o Why do economics majors earn more than marketing majors?
7.
James spent 4 hours studying for an exam, and he received an A on the exam.
Normally, he would have spent that time watching TV instead of
studying. James figures he could have made a B after studying only 2 hours,
but he really wanted an A. What is James ’s marginal cost in terms of TV
viewing to move from a B to an A on the exam?
Choose one: A. $4 B. 2 hours C. 4 hours D. 0 hours
8.
The opportunity cost of attending college is likely to be highest for a high
school graduate
Choose one: A. who is very intelligent. B. whose family is extremely
wealthy. C. who can immediately take over the family business. D. who
has access to student loans.
9.
Like a good economist, you calculated the cost of getting your college degree,
including the opportunity cost. Suppose that at your university, you will pay
$10,000 each year for tuition, $2,500 each year for textbooks,
and $10,000 per year for room and board. Before you left for college, your
boss at your high-school job offered you a job paying $25,000 per year.
Assume that if you decided not to go to college, your parents would let you
live at home.
Including the opportunity cost, what is the cost of attending four years of
college? $
190000
10.
Think about a country where most economic production results in a ground-
shaking explosion that cracks the foundations of buildings. What would be the
trade-off if the bad result (a ground-shaking explosion) were reduced?
Choose one: A. more of the activity that cracks the foundations of
buildings B. higher incomes C. lower incomes D. less of the activity
that cracks the foundations of buildings
11.
Suppose you own a bicycle but haven't found the time to ride it much lately.
These days, it is only worth $35 to you. One of your close friends, who
recently got a job at the college bookstore two miles down the road, wants to
take it off your hands. He offers you $70 for the bicycle, and you gladly accept.
Your friend is also happy because he thinks the bicycle is worth $110 .
How much
total
value was created from this trade? $
75.00
12.
Suppose that a coffee lover values his first cup of coffee each morning at $6,
but the second one is much less valuable. The local coffee shop allows a
person who buys one cup of coffee to come back later that day and purchase a
second cup of coffee for $1, which the coffee lover does. We would say the
local coffee shop is using
incentives
to make additional sales, and the coffee lover is using
marginal thinking
13.
You have always thought that hiking in the Rocky Mountains would be fun.
However, this activity would cost money and require time away from other
activities. This situation best exemplifies:
Choose one: A. opportunity costs. B. trade-offs. C. marginal
thinking. D. incentives.
.
14.
Lauren works as a server at a local restaurant. Applying the circular flow
model:
(a) The restaurant where Lauren works represents
one of the firms in the economy.
(b) The meals that the restaurant sells represent
a product in the product market.
(c) The labor that Lauren provides to the restaurant represents
a resource in the resource market.
15.
Emily attends a wedding reception where dinner is served. For her entrée, she
has the option of steak, chicken, or fish. If she chooses the fish, then her
opportunity cost is
Choose one: A. either the chicken or the steak—whichever would have
been her second choice after the fish. B. the steak. C. the chicken and
the steak. D. the chicken.
16.
You are trying to decide whether to pay a dog walker $100 or do the work
yourself. It would be rational to hire a dog walker if
Choose one: A. the dog walkers can do it more quickly than you can.
B. the last time you walked the dog, you saved the money and did it yourself.
C. you worked some extra hours last month and your paycheck was
$100 larger than usual. D. the opportunity cost of doing it yourself is more
than $100.
