Pennsylvania State University - ECON 102 Quiz 01. All Correct answers Reviewed and indicated. 100% Score

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ECON102 QUIZ1 Question 1 1 / 1 pts Does the richest man in the world face scarcity? Yes, because he has all the money and time that he needs. No, because he can buy virtually anythin... g that he wants. No, because he can pay people to do all of the things that he doesn’t have time to do. Correct! Yes, because his money and time are still limited. Everyone faces scarcity. Question 2 1 / 1 pts The causes of changes in gross domestic product would be studied by ___________. Correct! a macroeconomist neither a microeconomist nor a macroeconomist a microeconomist both a microeconomist and a macroeconomist Aggregate measures are Macroeconomics issues. Question 3 0 / 1 pts “If Penn State begins to fine students for littering, our classrooms would be cleaner” is an example of You Answered a normative statement. a fallacy. an empirical statement. Correct Answer a positive statement. Positive statements are not judgment driven. Question 4 1 / 1 pts When economists say ceteris paribus, they mean allowing all variables to change to reflect the reality of the situation being considered. assuming that the original statement is correct. considering all aspects of a relationship between two variables. Correct! holding all other variables fixed in order to focus on the two variables in question. Definition of ceteris paribus Question 5 1 / 1 pts A movie production company is considering making a sequel to one of their most popular films of 2009. In their decision, should they consider the cost of the original film or just the sequel? They should consider the cost of both films because the revenues from the sequel will cover part of the original cost. They should consider just the cost of the sequel because the cost of the original film has already been covered by the revenue of the original film. Correct! They should consider just the cost of the sequel because the cost of the original film is a sunk cost. The only cost that is important here is the marginal cost, or the cost of the sequel. They should consider the cost of both films because the cost of the sequel will likely be less than the cost of the original film. The cost of the original film is sunk. The cost of the sequel must be covered by the revenue from the sequel in order for the production company to be willing to make the sequel. Question 6 1 / 1 pts Opportunity cost is a cost that cannot be escaped because it has already been incurred. the value of a sunk cost. the lowest cost possible of producing a unit of output. Correct! the next-best alternative that we forgo when we make a choice. Definition of opportunity cost Question 7 1 / 1 pts Your opportunity cost of cutting hair at your barbershop is $20 per hour. Electricity costs $6 per hour, and your weekly rent is $250. You normally stay open nine hours per day. Each haircut costs $10. If you stay open a tenth hour, you can give three haircuts. Should you stay open for the 10th hour? No. The marginal benefit is lower than the marginal cost. Correct! Yes. The marginal benefit is greater than the marginal cost. Yes. The marginal cost of staying open for another hour is zero because all of the costs are sunk. No. You cannot cover all of your expenses. The marginal benefit of staying open another hour is $30 – 3 haircuts times $10 per haircut. The marginal cost is $26 -- $20 is the opportunity cost of your time plus $6 to pay for your electricity. Question 8 1 / 1 pts Economics Airlines currently spends $20,000 per month in airport fees and $10,000 per flight for fuel, crew, and airplane maintenance. Economics Airlines currently offers 5 flights from State College to Detroit and is considering offering a 6th. If each seat ticket costs $500, how many customers must fly on the 6th flight in order for Economics Airlines to be willing to run it? 60 40 10 Correct! 20 The marginal cost of operating a 6th flight is $10,000, so since each seat costs $500, 20 customers must fly. Question 9 0 / 1 pts Each donut that you consume for breakfast costs $.75. The first donut gives you $2.00 worth of pleasure, with each subsequent donut providing $.50 less pleasure than the previous one. What is the marginal cost of the 3rd donut? Correct Answer $.75 $1.75 You Answered $1.00 $.25 The marginal cost of each donut, including the third, is $.75. Question 10 1 / 1 pts Economic stability refers to a state in which an economy is operating efficiently, with technological progress and low inflation. Correct! an economy is experiencing sustained growth, with low inflation and high employment. an economy is equitable, promoting more equal distribution of income and wealth. an economy is maintaining its output level and its price level. Definition of economic stability. [Show More]

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