1. Jessica has decided to take a second job. Doing so reduces the number of hours
she can spend with her family per week from 40 to 35. Therefore, the opportunity cost
of taking the second job includes
a. the cost of uniforms required on the new job
b. 5 hours of time with her family
c. the higher weekly pay she receives from having two jobs
d. the 5 additional hours she works at the new job
e. 40 hours of time with her family
2. Bob makes $30 an hour as a plumber. He must take two hours off work to have a
piece of steel removed from his hand, but his union contract specifies the firm still pays
him for medical leave. The doctor will charge 80$ to remove the rusty steel.
a. What is the opportunity cost, in dollar terms, of Bob’s trip to the doctor?
b. Would this opportunity cost change if his union contract did not provide that he be
paid during his absence? What would his cost be?
3. Big Sugar will give a free concert at Simon Fraser University the same night that
Great Big Sea will perform at the University of British Columbia. UBC charges a $3 fee
at the door. You live in residence at Simon Fraser University and choose Big Sugar’s
concert, but your next best choice for the evening is to hear Great Big Sea. The
opportunity cost of hearing Big Sugar is:
a. the dollar value to you of hearing Great Big Sea minus the time and money cost of
driving to UBC and paying the door fee.
b. the time and money cost of driving to UBC and paying the door fee.
c. the dollar value to you of hearing Great Big Sea plus the time and money cost of
driving to UBC and paying the door fee.
d. The dollar value of the income that you could earn if you worked at your part-time job
instead of attending Big Sugar’s concert.
e. none of the above
4.
a.
b.
c.
d.
e.
Which of the points on the above figure represents productive inefficiency?
A
B
C
D
E
5.
a.
b.
c.
d.
e.
Which of the following would cause the figure above to shift in the manner indicated?
an improvement in the technology used to produce beans
a worsening of the technology use to produce beans
an improvement in the technology used to produce corn
a worsening of the technology used to produce corn
a jump in the demand for corn
6. The above figure illustrates the trade-off for a student who is currently taking an
economics class and a history class. The graph shows that the opportunity cost of
studying another hour of economics is
a. 40 points on the history exam
b. 4 hours economics study time
c. 10 points on the history exam
d. 1 point on the history exam
e. 90 points on the history exam
7. What is the difference between points that lie inside the production possibilities
frontier and those that lie on the outside of it?
a. Those on the outside are feasible but inefficient while those on the inside are not
feasible.
b. Those on the inside are not feasible but efficient while those in the outside are not
feasible .
c. Those on the inside are feasible and efficient while those on the outside are not
feasible.
d. Those on the inside are feasible and inefficient while those on the outside are not
feasible.
e. Those on the outside are feasible and efficient while those on the inside are not
feasible.
8.
a.
b.
c.
d.
e.
Economic growth is illustrated when a production possibilities frontier
shifts inward
shifts outward
becomes convex (bowed in)
in concave (bowed out)
is linear
9. Which of the following illustrates increasing opportunity cost on a production
possibilities frontier?
a. a linear PPF
b. a steep PPF
c. a downward sloping PPF
d. a concave PPF
e. a convex PPF
10. What would happen to the PPF for automobiles and wheat if the unemployment
rate increased from 4% to 6%?
a. It would stay the same.
b. It would shift inward.
c. It would shift outward.
d. It would become steeper.
e. It would become flatter.
11.
Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the
popularity of his local country western band, Farmer Tony has more students requesting lessons
than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an
hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth
of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat.
What is the total economic cost of the day that Farmer Tony incurred for his spring
day in the field planting wheat?
a. $130
b. $250
c. $300
d. $380
12. If you pay $5,000 a year in tuition and give up $20,000 a year of income to attend
college, then the yearly opportunity cost of college is:
a. only $5,000 of tuition.
b. only $20,000 of foregone income.
c. $15,000, the difference between tuition and foregone income.
d. at least $25,000 of tuition and foregone income.
a. less than $20,000 and more than $5,000.
13. Maria decides to spend an additional hour working overtime rather than watching a video
with her friends. She earns $9 per hour at her job. Her opportunity cost of working this extra
hour is:
a.
the enjoyment she would have received had she watched the video.
b.
the $9 she earns.
c.
the $9 she earns minus the enjoyment she would have received from watching the video.
d.
nothing, since she would have received less than $9 of enjoyment from the video.
e.
the cost of renting the video minus the $9 she earned while working.
16) Whenever the Democrats gain control of the Congress, spending on social programs
increases; whenever Republicans gain control of the Congress, spending on defense increases.
Hence, we know what the next party in control will do. This statement is an example of
A) fallacy of inductive reasoning.
B) post hoc, ergo propter hoc fallacy.
C) fallacy of composition.
D) ceteris paribus fallacy.
17) You know that the computer lab at school gets very crowded at about 3:00 p.m. To avoid the
crowds, you start going to the computer lab one hour earlier every day. However many students
make the same decision, and now the computer lab becomes very crowded at 2:00 p.m. This is
an example of the
A) post hoc, ergo propter hoc fallacy.
B) ceteris paribus fallacy.
C) fallacy of division.
D) fallacy of composition.
18) The government should extend the duration of unemployment benefits to those workers who
lost their jobs due to outsourcing. This statement is best described as
A) an example of marginalism.
B) an example of the fallacy of composition.
C) a normative statement.
D) a positive statement.
19) Which of the following is a normative question?
A) Why do gasoline prices increase between Memorial Day and Labor Day?
B) What will happen to gasoline consumption if the federal tax on gasoline is eliminated?
C) To reduce the regressive nature of the gasoline excise tax, should the portion of the gasoline
excise tax paid by high-income individuals be increased?
D) How will oil exploration be affected if the government subsidizes oil producers?
20) Which of the following is a positive question?
A) Will the level of teenage unemployment increase if the minimum wage is increased?
B) Should the minimum wage be set at one-half the average manufacturing wage to guarantee
individuals a decent standard of living?
C) Wouldn't it be more equitable if the minimum wage increased automatically with the cost of
living?
D) Wouldn't it be better to try to increase people's wages through job-training programs rather
than by requiring employers to pay minimum wages?
21) The amount of education that one has is an important factor in the determination of his or her
wage rate. This is best described as
A) a positive statement.
B) an example of the fallacy of composition.
C) a normative statement.
D) an example of marginalism.