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Questions and Answers
What is the net gain from purchasing a bottle of iced tea priced at $1.25 if the marginal benefit is $1.50?
What is the net gain from purchasing a bottle of iced tea priced at $1.25 if the marginal benefit is $1.50?
25 cents
What is the marginal cost of buying a second gallon of milk if the price is $4.00 for one and $6.00 for two?
What is the marginal cost of buying a second gallon of milk if the price is $4.00 for one and $6.00 for two?
$2.00
What would a larger reduction in personal income taxes for each child do according to the economic way of thinking?
What would a larger reduction in personal income taxes for each child do according to the economic way of thinking?
Reduce the after-tax cost of raising children and increase the birth rate
What does an individual have if they can produce at the lowest opportunity cost?
What does an individual have if they can produce at the lowest opportunity cost?
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Which of the following statements are true? (Select all that apply)
Which of the following statements are true? (Select all that apply)
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What is the opportunity cost of an action?
What is the opportunity cost of an action?
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To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.
To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.
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What economic system is characterized by completely private ownership of property?
What economic system is characterized by completely private ownership of property?
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In a market economy, who determines who gets the goods and services produced?
In a market economy, who determines who gets the goods and services produced?
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What policy would be most effective in promoting monthly water conservation?
What policy would be most effective in promoting monthly water conservation?
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What demonstrates marginal thinking?
What demonstrates marginal thinking?
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Which statement is most consistent with the rule of rational choice?
Which statement is most consistent with the rule of rational choice?
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What does an economist conclude if you lose $20 and choose to search for it rather than work?
What does an economist conclude if you lose $20 and choose to search for it rather than work?
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What can be reasonably concluded if resources are free to move across state lines and Oregon specializes in honey while California specializes in almonds? (Select all that apply)
What can be reasonably concluded if resources are free to move across state lines and Oregon specializes in honey while California specializes in almonds? (Select all that apply)
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What does marginal analysis involve?
What does marginal analysis involve?
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Does a downward sloping straight-line production possibilities curve imply a constant opportunity cost?
Does a downward sloping straight-line production possibilities curve imply a constant opportunity cost?
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Will you purchase a new sport utility vehicle for $22,000 if the expected marginal benefit to you is $20,000?
Will you purchase a new sport utility vehicle for $22,000 if the expected marginal benefit to you is $20,000?
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What permits gains from trade to be realized?
What permits gains from trade to be realized?
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What should be true if a student enrolls in an additional course?
What should be true if a student enrolls in an additional course?
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What is the opportunity cost of a concert if a student has a major economics exam in the morning? (Select all that apply)
What is the opportunity cost of a concert if a student has a major economics exam in the morning? (Select all that apply)
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What is likely to happen if Lance's boss offers him twice his usual wage to work instead of going on a date?
What is likely to happen if Lance's boss offers him twice his usual wage to work instead of going on a date?
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Which of the following statements are true? (Select all that apply)
Which of the following statements are true? (Select all that apply)
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Study Notes
Marginal Benefits and Costs
- Marginal benefit of drinking bottled iced tea is $1.50; the price is $1.25, resulting in a net gain of $0.25 upon purchase.
- For milk, buying one gallon costs $4.00 and two gallons cost $6.00, making the marginal cost of the second gallon $2.00.
Economic Policies
- Increasing tax reductions for parents would lower after-tax costs of raising children, likely raising birth rates.
- A per gallon fee escalating from $1.00 to $2.00 for consumption beyond 1,000 gallons promotes water conservation.
Comparative Advantage
- An individual has a comparative advantage by producing at the lowest opportunity cost.
- Countries should export goods with comparative advantage and import others for trade gains.
Market Economy
- The hallmark of a market economy is private ownership of property and reliance on market systems for economic coordination.
- Goods and services distribution in a market economy is determined by consumers' purchasing power.
Rational Choice and Opportunity Cost
- Rational choice involves evaluating new drugs by weighing potential health benefits against known side effects.
- Opportunity cost is defined as the highest valued option forgone when making a choice, illustrated by the scenario of losing $20 while choosing to search for it instead of working.
Marginal Thinking and Analysis
- Marginal thinking is evident when deciding to study more if the expected score improvement outweighs the time sacrifice.
- Marginal analysis requires comparing additional benefits of an action to its additional costs.
Production Possibilities
- A downward-sloping production possibilities curve indicates constant opportunity costs.
- If Oregon specializes in honey and California in almonds, both states have comparative advantages, affirming that all statements regarding opportunity costs and advantages are true.
Expected Benefits and Trade-offs
- A vehicle's expected marginal benefit of $20,000 against a price of $22,000 suggests rationality in forgoing the purchase.
- Enrolling in an additional course implies expected marginal benefits must exceed its costs.
- Opportunity costs need consideration when choosing between events, such as attending a concert versus studying for an exam.
Labor and Market Dynamics
- Higher wages offered in exchange for work increase the opportunity cost of personal choices, like a date.
- In product markets, firms buy while households sell; in factor markets, it’s reversed, emphasizing the interdependency in the economy.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your understanding of key concepts in Economics Module 3 with these flashcards. Each card presents a term or scenario followed by its definition, helping you grasp the fundamentals of marginal benefit and cost. Enhance your economic literacy through engaging and interactive learning.
