Evaluation
Chapter 1
Name:
Opportunity Cost: Discuss the ways in which the following conditions might
affect the OC of going to a movie tonight:
a. You have a final exam tomorrow.
1.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------b. School will be out for one month starting tomorrow.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------c. The same movie will be on TV next week.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------d. The final prime of Star Academy is on TV.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------2. Determine whether each for the following statements is true, or false.
Explain your answers:
a. Economics studies how society tries to solve the human problems of
unlimited wants and scarce resources, and how individuals and
societies choose to use these resources.
b. The OC of an activity is the total value of all the alternatives passed up.
c. OC is an objective measure of cost.
d. When making choices, people carefully gather all available information
about the costs and benefits of alterative choices.
e. A decision maker seldom knows the actual value of a forgone
alternative and therefore must make decisions based on expected
values.
f. Marginalism represent the costs spent and cannot be recovered.
g. Sunk costs are always irrelevant in decision making.
h. OC can’t always be measured.
i. The water-diamond issue is a matter of marginalism.
3. You can either spend spring break working at home for $80 per day for five
days or spend the week at a resort in Faraya. If you stay home, your
expenses will total about $100. If you go to Faraya, the trip, hotel, food, and
miscellaneous expenses will total about $700. What’s your OC of going to
Faraya?
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------4. Dany signed up with an internet provider for a fixed fee of $20 per month.
For this fee he gets unlimited access to the web. During the average month,
he logged onto the web for 17 hours. What is the average cost of an hour of
web time to Dany? What is the marginal cost of an additional hour?
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------5. Choose the right answer:
Deciding that the large number of automobiles is responsible for the high
crime rate found in the large cities is:
 Post hoc fallacy
 Composition fallacy
 Problem in reasoning
 Cause-effect problem
What criteria are used to judge economic policies?
 Efficiency, Equity, Growth, Waste
 Inflation, Efficiency, Growth, Employment
 Efficiency, Equity, Growth, Stability
Allowing Chile to join NAFTA would cause wine prices to drop in the US
 This is an example of Normative Economics
 This is an example of Positive Economics