Opportunity Cost and Incentives

A city council has $50,000 for community projects. Members must choose between expanding a youth sports program or buying new musical instruments for the public arts center. They pick the youth sports program. What is the opportunity cost of their decision?

• The taxes collected for the budget

• The total spent on sports expansion

• The new instruments for the arts center

• The satisfaction residents feel now

Which policy aligns LEAST with Keynesian recommendations during a recession?

• Expand unemployment benefits for households

• Increase public works to boost aggregate demand

• Cut government spending to balance budgets now

• Lower interest rates to encourage borrowing

What is meant by the money supply in an economy?

• Total profits earned by domestic businesses

• Total revenue collected from international trade

• Total amount of money circulating among the public

• Total funds invested in infrastructure projects

Gas prices rise sharply for several months. Which outcome best illustrates the income effect rather than the substitution effect?

• Commuters replace car trips with bus or train rides

• Drivers switch from premium gasoline to regular gasoline

• Families choose carpooling instead of solo commuting

• Households reduce overall driving to save fuel expenses

Which economic concept best explains the spillover benefits when education raises workers’ skills and helps others through their work?

• Law of demand for schooling

• Equilibrium in competitive markets

• Law of supply of labor

• Positive externality from education

• Negative externality from learning

Which statement about the Production Possibilities Curve (PPC) is correct?

• A point inside the PPC shows overuse

• Capital includes only physical tools

• Land means only soil on farms

• A point on the PPC uses resources fully

Use the PPC shown. At point D (about 6 hundreds of truck tires, 5 hundreds of bike tires), increasing bike tires by 300 units requires giving up how many truck tires?

• 100 units of truck tires

• 200 units of truck tires

• 400 units of truck tires

• 500 units of truck tires

Which feature most clearly distinguishes a sole proprietorship from a limited liability company (LLC)?

• Owner has unlimited personal liability for debts

• Profits are taxed through members’ personal returns

• Owners are called members by the state laws

• Entity shields all owners from wrongful act liabilities

Which federal law primarily regulates minimum wage and overtime pay standards for workers in the United States?

• Taft–Hartley Labor Management Act

• Employee Retirement Income Security Act

• Fair Labor Standards Act

• Occupational Safety and Health Act

A company wants to increase productivity by investing in physical capital. Which action best fits this strategy?

• Extending shifts to run operations twenty-four hours

• Hosting free workshops to upskill current employees

• Contracting routine tasks to a smaller vendor

• Purchasing advanced manufacturing equipment for the factory