2024 Econ Quiz #2

Using cost-benefit analysis, a local government would decide to build a new bridge if

• The additional tax paid by an individual resident is greater than the additional benefit of building the bridge for all residents.

• The toll paid by an individual resident crossing the bridge is less than the resident’s benefit from crossing the bridge.

• The total costs of building the bridge are less than the total benefits from building the bridge.

• The total costs of building the bridge are greater than the total benefits from building the bridge.

• Total costs are at a minimum and total benefits are at a maximum.

Assume a worker can either cut grass or wash windows in a given day. It takes 5 hours to mow a one-acre lawn and 2.5 hours to wash all the windows in a house. When a worker chooses to wash the windows of four houses in a neighborhood, what is the opportunity cost of this decision?

• The pay the worker receives for washing the windows in the four houses

• The pay the worker would receive for cutting one lawn

• Cutting the grass at the same four houses

• The pay the worker would have received from cutting the grass at two houses

• The pay the worker would receive for cutting .25 lawns

Answer explanation

The opportunity cost of washing windows is the next-best alternative the worker has given up to wash windows. If it takes 5 hours to mow the one-acre lawn and 2.5 hours to wash the windows, the opportunity cost of mowing one lawn is washing the windows of two houses; the opportunity cost of washing the windows of one house is mowing .5 lawns. Thus, in washing the windows of four houses the worker is expending 10 hours, the time in which he could cut two lawns; or 4 houses multiplied by .5 lawns equals two lawns and the pay that he would have earned.

According to rational economic decision making, we should accept an option when

• the costs outweigh the

  benefits

• the benefits outweigh

  the costs

• there are no costs

• there are no benefits

Which of the following represents a marginal cost?

• mortgage payments

• the sum of fixed costs and

  variable costs

• wages and raw materials

• the cost of producing one additional unit

Compare the costs of an action with the benefits of that action; if benefits exceed costs, then the action is worth it. This comparison is known as:

• Incentives

• cost-benefit analysis

• Positive economics

• Normative economics

People’s wants are unlimited. This fact means that which of the following is always present?

• Shortages

• Scarcity

• Marginal utility

• Future Consequences Count

Which statement describes the law of demand?

• As prices rise, quantity demanded decreases

• As prices rise, demand decreases.

• As prices fall, quantity demanded decreases.

• As prices fall, demand decreases.

The amount of a good or service that producers are willing and able to sell at all possible prices during a given period of time.

• Supply

• Demand

• Factor of Production

• Production

Capital refers to...

• The "gifts of nature" or natural resources not created by human effort.

• people with all their physical and mental efforts and abilities

• the tools, equipment, and factories used in production of goods and services

• individuals who start a new business or bring a product to market.

Labor refers to...

• people with all their physical and mental efforts and abilities

• individuals who start a new business or bring a product to market.

• the tools, equipment, and factories used in production of goods and services.

• The "gifts of nature" or natural resources not created by human effort.