5) Why does scarcity lead to the what, how, and for whom questions?
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
6) List and explain the three fundamental economic questions that must be answered by all
economic systems.
Skill: Level 1: Deinition
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
7) Pumpkins are grown in New Mexico with the aid of fertilizer. Hence, fertilizer is a partial
answer to which of the three economic question?
Skill: Level 3: Using models
Section: Checkpoint 1.1
Status: Old
AACSB: Relective thinking
121
8) Diferent nations answer the what, how, and for whom questions diferently. China, for
instance, builds dams using many workers and only a little capital equipment. The United
States builds dams using a few workers and a lot of capital equipment. Which economic
question are these two nations answering and why do the answers difer?
Skill: Level 4: Applying models
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
9) The question “Will doctors or lawyers have higher annual incomes?” represents which of
the three basic economic questions?
Skill: Level 3: Using models
Section: Checkpoint 1.1
Status: Old
AACSB: Written and oral communication
1.7 Essay: The Economic Way of Thinking
1) What is the diference between microeconomics and macroeconomics?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
122
2) What is an opportunity cost? Give an example.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
3) Your friend is preparing for this exam and in your practice session makes the following
statement: “Instead of attending microeconomics class for two hours, Kiki could have
played tennis or watched a movie. Therefore, the opportunity cost of attending class is the
tennis and the movie she had to give up.” Is your friend’s analysis correct or not? Explain
your answer.
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
4) Rather than go out to eat by yourself, you decide to stay at home and ix dinner for
yourself and your two roommates. Your roommates applaud your decision. Your roommates
tell you that your decision to eat at home has no opportunity cost because you already have
all the dinner ingredients in your pantry. Is this comment correct?
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
123
5) Shaniq can spend the next hour studying for a inance test, hiking along the Oregon
coast, watching reruns of Lost on television, or napping. If she decides to study, what is the
opportunity cost of her choice: hiking, watching television, or napping?
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
6) For spring break, Melanie will either stay home or go to Daytona Beach. At home,
Melanie pays $10 per day for food and earns $90 a day at her job. At Daytona Beach,
Melanie will stay with friends and so has no lodging cost. She will pay $20 per day for food.
In terms of dollars, Melanie’s opportunity cost per day of going to Daytona Beach is how
much?
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
7) Why is the beneit of something measured by what you are willing to give up?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
8) Deine marginal cost and marginal beneit.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
9) In New State, the bottling law requires that people get a refund of ive cents when they
return an empty bottle or can. Why does the state pay people to return bottles? In your
answer, be sure to mention the role played by rational choice.
Instead of throwing away bottles and cans, people will now bring the used bottles and cans
to the designated areas for recycling in order to receive their payment. Thus policy makers
have taken advantage of people’s rational decision making in order to reduce litter and
clean the environment.
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
10) Must a rational choice always work out well? In other words, is it possible for someone
to regret a rational decision?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
11) Discuss what is necessary to make rational decisions. Be sure to mention opportunity
cost, marginal cost, and marginal beneit.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
125
12) What is a positive statement? Give an example.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
13) What is the diference between positive and normative statements?
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
14) Two economists can agree that raising the minimum wage creates unemployment yet
one might argue that raising the minimum wage is a good policy and the other that it is a
bad policy. Why can this diference exist? Be sure to use the terms positive and normative
in your answer.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
126
15) Explain whether the statement, “There is life on Mars,” is a normative or positive
statement.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
16) Explain whether the statement, “Hillary Clinton was elected President of the United
States in 2008,” is a normative or positive statement.
Skill: Level 3: Using models
Section: Checkpoint 1.2
Status: Old
AACSB: Written and oral communication
17) What is a normative statement? Give an example.
Skill: Level 1: Deinition
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
18) Explain whether the statement “The government should increase tarifs on Japanese
cars to protect the American car industry from competition,” is a normative or positive
statement.
Skill: Level 2: Using deinitions
Section: Checkpoint 1.2
Status: Old
AACSB: Relective thinking
127
1.8 Essay: Appendix: Making and Using Graphs
1) Why do economists use graphs?
Skill: Level 2: Using deinitions
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
2) What kind of information is conveyed in a time-series graph?
Skill: Level 2: Using deinitions
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
128
3) In the diagram below, label the x-axis, the y-axis, and the origin.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
129
4) The table above shows how many blouses Katie and Kim will purchase at diferent prices
for a blouse. In the igure, label the axes and put the price on the y-axis and the quantity of
blouses on the x-axis. Plot the data for Katie in the igure. Then, plot the data for Kim in the
igure.
Skill: Level 1: Deinition
Section: Chapter 1 Appendix – Checkpoint 1
Status: Old
AACSB: Analytical thinking
130