ECON Chapter 2 Test

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

• normative statement
• budget constraint
• trade-off
• opportunity cost

Attending college is a case where the ________________ exceeds the monetary cost.

• A. budget constraint
• B. marginal analysis
• C. opportunity cost
• D. marginal utility

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

• A. the production possibilities frontier
• B. allocative efficiency
• C. scarcity
• D. utility

Why is there scarcity?

• A. Because the opportunity set determines this.
• B. Because theory dictates it.
• C. Because our unlimited wants exceed our limited resources
• D. Because human wants are limited.

Scarcity exists because of:

• A. the market mechanism.
• B. specialization and division of labor.
• C. the allocation of goods by prices
• D. unlimited wants and limited resources.

Scarcity implies that:

• A. consumers would be willing to purchase the same quantity of a good at a higher price.
• B. it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
• C. at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce.
• D. consumers are too poor to afford the goods and services available.

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

• A. nothing, because he enjoys playing basketball more than studying.
• B. the increase in skill he obtains from playing basketball for that hour.
• C. the benefit to his grades from studying for an hour
• D. nothing, because he had a free pass into the sports complex to play basketball.

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

• A. $0
• B. $4
• C. $40
• D. $44

The opportunity cost of attending university is likely to include all except which of the following?

• A. the cost of haircuts received during the school term
• B. the income you forgo in order to attend classes
• C. tuition fees
• D. the cost of required textbooks

The opportunity cost of an action:

• A. can be determined by considering both the benefits that flow from as well as the monetary costs incurred as a result of the action.
• B. can be determined by adding up the bills incurred as a result of the action.
• C. can be objectively determined only by economists.
• D. is a subjective valuation that can be determined only by the individual who chooses the action.