Econ 231 - Microeconomics and Social Issues

Economics is the study of

• how to make money

• how to allocate resources to satisfy wants and needs

• capitalism

• how to make workers more productive and firms more profitable

• markets

When consumers discard their gasoline-powered automobiles for electric-powered ones, this partially reflects the ____ of gasoline.

• scarcity

• luxury

• necessity

• specialization

• incentive

Microeconomics is the study of

• how government activities affect the economy

• individual decision-making units

• collective decision making

• the operation of the economy as a whole

• the interaction between the government and businesses

Economic professors are well aware of the importance of incentives. Which of the following situation shows the use of a positive incentive?

• students who show up late to class will not be allowed in the classroom

• students who do not have a doctor's not will not be allowed to take an exam at a different time

• students can choose whether they want to attend class --- there is no attendance policy

• students can choose to get a higher grade by doing extra credit work

• the professor decided to teach the class by reading out of the textbook to the entire class

In growing number of cities, stores are required either not to make available plastic or paper bags or to do so only for an additional fee. What kind of incentive is this fee?

• direct

• indirect

• neutral

• complementary

• unintended

Some public transit systems use an "honor system" whereby patrons have to show that they have paid their fare only when asked for it by an enforcement officer. With what population would such a system be successful?

• a population that is willing to take risks and whose people believe that they will not be caught if they don't pay their fare

• a population that places a high opportunity cost on taking time to purchase a ticket

• a population whose people are willing to take risks, believe that they will not be caught if they don't pay their fare, and treat fines for not paying a fare as a nuisance

• a population that is unwilling to take risks and whose people believe there is a high chance that they will be caught if they don't pay their fare

• a population whose people are unwilling to take risks, believe there is a high chance that they will not be caught if they don't pay their fare, and place a low value on doing the right thing

Kelly is an architect, and she is trying to decide whether to hire Lawrence, a draftsman, to assist with her work. Kelly could hire Lawrence at $20 per hour, but it would take him three times as long to complete a task as it takes Kelly. Kelly is able to earn $90 per hour and has more architectural jobs than she is able to handle. Which of the following is true?

• Kelly should not hire Lawrence because it would be faster for her to do the work herself

• Kelly should do the drafting work herself because she has the lower opportunity cost

• Lawrence should be hired at the $20 per hour wage rate

• Lawrence should be hired, but only if he is paid more than $30 per hour

• Kelly should hire someone who earns minimum wage instead of Lawrence

The opportunity cost of going to school rather than working is the cost of

• food

• housing

• clothing

• health care

• potential wages

According to economists, one reason few professional athletes have PhD's is that the

• opportunity cost of going to graduate school is too high

• marginal benefit of going to graduate school is too high

• marginal cost of going to graduate school is too high

• comparative cost of going to graduate school is too high

• explicit cost of going to graduate school would be too high

Many stores are open 24 hours a day, When store managers make the decision to stay open 24 hours, it must be the case that

• the marginal benefit of staying open all day and the marginal cost to remaining open all day are at least equal

• the marginal benefit of staying open all day must always be greater than the marginal cost to remaining open all day

• the marginal cost of staying open all day must always be greater than the marginal benefit to remaining open all day

• the calculation of marginal benefits or marginal costs of remaining open all day plays no role

• the marginal benefit of remaining open all day is zero