iVAT Chapter 1

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Question #1

When quantity supplied is greater than quantity demanded

A prices are constant

B prices are in equilibrium

C Prices have a tendency to rise

D prices have a tendency to fall

E not enough information to answer

Question #2

When quantity demanded is greater than quantity supplied:

A Prices are in equilibrium

B Prices have a tendency to remain constant

C Prices have a tendency to rise

D Quantity demanded will shift

E Prices have a tendency to fall

Question #3

Theoretical models are used to do the following:

A Increase complexity and gain insights into that complexity.

B Gain an understanding of how economic variables interact by making simplifying assumptions, and making predictions based on the insights from the model.

C Gain an understanding of how economic variables converge and diverge from one another by making increased complexity an inherent part of the model.

D Gain an understanding of how economic variables converge by making the real world more complex, and making predictions based on the insights from the increased complexity.

Question #4

Suppose that an individual takes a month long vacation to Fiji that costs $5,000. They value the vacation at $12,000. This individual could have earned $6,000 after taxes over the course of that month.
Should the individual take the vacation?

A No, due to the following reason:
M B = 12 , 000 > M C = 5 , 000

B Yes, due to the following reason:
M C = 12 , 000 > M B = 11 , 000

C Yes, due to the following reason:
M B = 12 , 000 > M C = 11 , 000

Question #5

A MC=$5,000
MB=$12,000

B MC=$6,000
MB=$12,000

C MC=$5,000+$6,000=$11,000
MB=$12,000

D MC=$5,000+$6,000=$11,000
MB=$12,000+$11,000=$23,000

Question #6

The opportunity cost of spending $50 billion on education is:

A The investment in building educational facilities

B The foregone benefit of improved education outcomes

C The cost of paying teacher’s salaries

D The foregone cost of education spending

E The foregone net benefit from spending $50 billion on healthcare

Question #7

The opportunity cost for a factory worker during their 8 hour shift is:

A The parking fees at the factory

B The net benefit that they could have received by spending that 8 hours in college

C Textbook costs

D transportation costs

E The net benefit that they could have received from working at their job

Question #8

The economic decision rule states that you should engage in an activity if:

A marginal benefit is greater than the marginal cost

B The marginal cost is greater than the marginal benefit

C The total cost is greater than the total benefit

D All else being equal you are worse off from the activity

E All of the answers available are correct

Question #9

An example of a marginal benefit would be:

A The additional money a firm spends on purchasing a computer.

B The additional expense incurred by engaging in an activity.

C The additional revenue gained from selling an additional computer.

D The fixed benefit of going to college over 4 years.

Question #10

Sunk costs are costs that:

A Are variable and change when you engage in some activity

B Are constant in the long run, but are variable in

C Can be recovered and thus are relevant to the decision at hand

D Cannot be recovered and thus are irrelevant to the decision at hand

E Are purely variable

Question #11

Even though microeconomics and macroeconomics are separate fields of study within economics, what is an example of how the two separate fields can affect each other?

A Inflation, which is primarily a topic studied under macroeconomics, can impact how individuals make consumption decisions, which is a topic relegated primarily to microeconomics.

B Unemployment, which is primarily a topic studied under microeconomics, can impact aggregate demand, which is a topic relegated primarily to macroeconomics.

C Inflation, which is primarily a topic studied under microeconomics can impact aggregate demand, which is a topic relegated primarily to microeconomics.

D Unemployment, which is primarily a topic studied under macroeconomics, can impact aggregate demand, which is a topic relegated primarily to microeconomics.

Question #12

An example of non-market rationing is:

A the allocating of slots into Harvard based on who can afford the price of tuition

B the allocating of kidneys based on life expectancy

C cost-benefit analysis

D the allocating of healthcare to those who can afford the price of care

E the allocating of Ferraris to those who can afford the price of Ferraris

Question #13

Non-market rationing is done through:

A social, cultural, and political means

B marginal costs

C the price mechanism