Appalachian State University

ECO 2040

Quiz 1: Introduction, Alternatives, Limits, and Choices

1)Which of the following is another way of saying “marginal benefits of an action?”

2. After graduating from high school, Adam is thinking about going to college. The college tuition is $15,000 a year. Instead of going to college, Adam could take a full- time job that pays $25,000. What is Adam's opportunity cost of attending college for one year?

3. A point inside the production possibilities curve is              while a point outside the curve is             .

4. Efficiency means that

5. A point or product-combination to the left of and inside a budget line:

6. Economists use the word equality to describe a situation in which…

7. A rational decision maker takes an action if and only if…

8. A budget line is a graph that shows the carious combinations of two products that a:

9. Which of the following statements best represents the principle represented by the adage, “There is no such thing as free lunch?”

10. One effect of the government-imposed seat belt law in the U.S. has been:

11. Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800 once the repairs are complete. Mike discovers that, in addition to the

$500 he has already spent, he needs to make an additional repair, which will cost another $400, in order to make the boat worth $800 to potential buyers. He can sell the boat as it is now for $300. What should he do?

12. When computing the opportunity cost of attending a concert you should include:

13. The opportunity cost of doing or getting something is best and fully defined as:

14. Traci is planning to sell her house, and she is considering making two upgrades to the house before listing it for sale. Replacing the carpeting will cost her $3,000 and replacing the roof will cost her $6,000. Traci expects the new carpeting to increase the value of her house by $2,500 and the new roof to increase the value of her house by $7,500.

15. You are considering staying in college another semester so that you can complete a major in economics. In deciding whether or not to stay you should…

16. A marginal change is a …

17. Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75.

18. What you give up to obtain an item is called your…

19. What does “there is no such thing as a free lunch” mean in economics?

20. People are willing to pay more for a diamond than for a bottle of water because…