1.4 Integrative Questions
1) Suppose you decide to attend summer school and that this is considered a rational choice. When making this choice,
A) you must ignore the problem of scarcity.
B) you considered the marginal cost and marginal benefit of your choice.
C) you have used the ceteris paribus assumption.
D) you have made a positive statement.
E) you must have considered the social interest.
2) John decides to leave college early and play professional sports. Which of the following economic principles does John use?
i.personal economic policies
ii.marginal cost versus marginal benefit analysis
iii.normative versus positive economics
A) i and ii
B) i, ii and iii
C) ii only
D) i and iii
E) ii and iii
3) Which of the following is true?
i.A rational choice is always made in the pursuit of social interest.
ii.Economics is a social science.
iii.Economists try to understand how the economic world works by testing positive statements.
A) ii and iii
B) only i
C) only ii
D) only iii
E) i and ii
4) Which of the following is true?
i.A rational choice is made on the margin.
ii.Microeconomics is the study of the national economy while macroeconomics is the study of the global economy.
iii.Economists try to understand how the economic world works by testing normative statements.
A) only i
B) i and iii
C) only ii
D) only iii
E) i and ii
5) Will, Bill, and Phil decide to study an extra hour for an exam. Instead of studying, they could have gone out to eat, played football, or watched TV. Which of the following statements is correct?
A) The benefit the three students receive must be the same because they all make the same choice.
B) The students made a rational choice as long as they face no scarcity.
C) The students could each have different opportunity costs.
D) The marginal cost of the decision is the same if they make the same score on the exam.
E) Going out to eat, playing football, and watching TV are all called sunk costs.
6) Which of the following is true regarding a normative statement?
i.It uses the ceteris paribus assumption.
ii.It is a value judgment.
iii.It accounts for opportunity costs.
A) i and iii
B) ii and iii
C) i only
D) ii only
E) i, ii, and iii
7) To help unscramble cause and effect, economists
A) use the concept of opportunity costs.
B) must use the ceteris paribus assumption.
C) answer the "what" question.
D) answer the "how" question.
E) must use normative statements.
8) Which of the following is true regarding this statement? "The president's decision to spend more money on national defense is smart."
A) This is a normative statement.
B) The federal government does not face scarcity.
C) This topic would be studied in microeconomics.
D) Social interest must always be more important than self-interest.
E) Ceteris paribus does not apply to the government.
9) Gregory is considering attending a concert with a ticket price of $40. He estimates that the cost of driving to the concert and parking there will add an additional $20. In order to attend the concert, Gregory will have to take time off from his part-time job. He estimates that he will lose 5 hours at work, at a wage of $8 per hour. In terms of dollars, Gregory's opportunity cost of attending the concert equals
A) $80.
B) $100.
C) $40.
D) $60.
E) $20.
10) Kevin is re-finishing an antique grandfather clock that he purchased at a flea market for $300. He expects to be able to sell the clock for $450. At the last minute, Kevin discovers that he needs to repair the gears at a cost of $175 to make the clock worth $450 to potential buyers. It turns out that he could also sell the clock now, without completing the additional repairs, for $250. What should Kevin do?
A) He should sell the clock now for $250.
B) He should keep the clock but not make the repairs since the original $300 is a sunk cost.
C) He should complete the additional repairs and sell the clock for $450.
D) He should keep the clock after making the repairs since it is not rational to spend a total of $475 on an item that can only be sold for $450.
E) Kevin is indifferent between selling the clock as is or selling it after completing the repairs.
