Chap 01 2e Macro
Indicate the answer choice that best completes the statement or answers the question.
1. You can spend $300 on either a pair of new Air Jordan sneakers or a new skateboard. If you choose to buy
the Air Jordans, the opportunity cost is:
a. $300.
b. your enjoyment of the new skateboard.
c. both the $300 and your enjoyment of the new skateboard.
d. impossible to determine.
2. You just moved into your new apartment, which has washer and dryer hookups, but your apartment complex
doesn't provide washers and dryers. You don't want to go to a laundromat. You can rent a washer and dryer
set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,100,
which you could sell after one year for $700, or $600 after two years. Should you buy or rent the set?
Choose the correct statement.
a. If you plan to stay in the apartment for one year, you should rent the set to earn $40 worth of economic surplus.
b. If you plan to stay in the apartment for one year, you should buy the set to earn $40 worth of economic surplus.
c. If you plan to stay in the apartment for two years, you should rent the set to earn $220 worth of economic surplus.
d. If you plan to stay in the apartment for two years, you should buy the set to earn $500 worth of economic surplus.
3. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring
efficient management of costs. At one manufacturing plant, if Nissan devotes all of its resources to
manufacturing sedans, it can produce 480,000 sedans per year. If Nissan devotes all of its resources to
manufacturing trucks, it can produce 240,000 trucks per year. What is Nissan's opportunity cost of
producing one sedan at this manufacturing plant?
a. half truck
b. two trucks
c. half sedan
d. two sedans
4. Nerida is thinking of buying a car to avoid taking Uber to work. She is using the cost-benefit principle to
evaluate this decision and is calculating the costs and benefits to owning the car over the next year. The car
costs $15,000 to purchase, but she can resell it after a year of use for $13,500. The cost of the car for the
year is:
a. $15,000.
b. $13,500.
c. $1,500.
d. $28,500.
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Chap 01 2e Macro
5. An investor is franchising a new type of fitness studio that will be the first in the city and must determine how
many locations to open. Each location will have a manager with a salary of $4,000 per month and two part-
time employees with salaries of $2,000 each per month. Additional operating costs, including rent and
utilities, will be $6,000 per month at each location. The investor projects that after the business gains traction,
the first location will have 1,100 members. The second location will bring in 950 members. The third and
fourth locations will bring in 350 and 200 members, respectively. The monthly membership fee will be $45
per member. How many locations should the investor franchise?
a. one
b. two
c. three
d. four
6. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring
efficient management of costs. In the past, if Nissan devoted all of its resources to manufacturing sedans, it
could produce 480,000 sedans per year at one manufacturing plant. If Nissan devoted all of its resources to
manufacturing trucks, it could produce 240,000 trucks per year. A new production technique now allows
Nissan to produce either 600,000 sedans or 360,000 trucks per year. How would Nissan's production
possibilities frontier reflect this new production technique?
a. A movement along the production possibilities frontier to manufacture more sedans.
b. A movement along the production possibilities frontier to manufacture more trucks.
c. An inward shift of the production possibilities frontier.
d. An outward shift of the production possibilities frontier.
7. Juan is willing to pay $600 for a new iPad. Apple is selling its new iPad for $700. It costs Apple $400 to
produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____
would be better off due to the transaction.
a. will; neither Juan nor Apple
b. will; both Juan and Apple
c. will not; only Juan
d. will not; only Apple
8. Kathleen is binge-watching her favorite show on Netflix. She is attempting to decide how many more
episodes to watch. Kathleen should continue watching episodes as long as the marginal:
a. benefit of watching another episode exceeds the marginal cost.
b. benefit of watching another episode is less than the marginal cost.
c. benefit of watching another episode is positive.
d. cost of watching another episode is positive.
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9. Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can
make 20 drinks that sell for $4 on average in one hour. A second worker can make another 16 drinks in one
hour. The marginal benefit of each additional worker decreases by four drinks with each additional hire.
Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles
hire for each hour?
a. four
b. five
c. six
d. seven
10. For an economist, the cost of a good is:
a. the dollar amount of money you paid to get it.
b. what you gave up to get it.
c. always equal to the true market value of the good.
d. the quantity of resources used to produce it.
11. The _____ suggests, decisions about quantities are best made incrementally.
a. cost-benefit principle
b. opportunity cost principle
c. marginal principle
d. interdependence principle
12. Amanda goes to a local café and orders a sandwich. She is willing to pay $10 for it. The price of the
sandwich is $4. The cost to the café to produce that sandwich is $1. How much economic surplus does
Amanda receive when she purchases the sandwich?
a. $10
b. $6
c. $4
d. $3
13. If the state of New York allocates additional spending on after-school programs for at-risk youths, then the
opportunity cost of these expenditures is:
a. zero, if the state is running a budget surplus.
b. the dollar amount of the additional spending.
c. relevant only if taxes must be raised to fund the spending.
d. the value of alternative expenditures forgone in making this allocation.
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14. The marginal principle says that decisions about quantities are best made:
a. incrementally.
b. arbitrarily.
c. all at once.
d. in total.
15. Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $50,000. He decides that
he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay
up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because
_____ positive economic surplus from the transaction.
a. occurs; both Ivan and Samantha receive
b. occurs; only Samantha receives
c. does not occur; only Ivan receives
d. does not occur; neither Ivan nor Samantha receives
16. If resources are scarce:
a. they are insufficient to provide enough goods and services to satisfy all human material wants and needs.
b. there are not enough of them for firms to produce goods and services.
c. they are probably overvalued by consumers.
d. their supply is unlimited.
17. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring
efficient management of costs. At one manufacturing plant, if Nissan devotes all of its resources to
manufacturing sedans, it can produce 480,000 sedans per year. If Nissan devotes all of its resources to
manufacturing trucks, it can produce 240,000 trucks per year. What is Nissan's opportunity cost of
producing one truck at this manufacturing plant?
a. half truck
b. two trucks
c. half sedan
d. two sedans
18. Carolyn is a junior in college studying economics. She has created a new software application that applies
the four principles of economic decision making to any potential decision that a user may face. She is
considering leaving school after this academic year to pursue further development of her app. Carolyn should
ignore all of these costs when calculating the opportunity costs of leaving college EXCEPT the:
a. time she will spend working on the app instead of studying.
b. 90 credit hours she has already completed for her degree.
c. tuition costs she has already paid to her college.
d. skills she may gain from her final year of economics courses.
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