BR1B: Bridge: Key Ideas in Economics
Question 1
Lisa is choosing between three alternatives: a) working at her job that pays 60 dollars; b) writing a term paper which she values at 40 dollars; or c) going out with a friend, which she values at 80 dollars. The opportunity cost of writing the term paper is:
A. 0 dollars.
B. 80 dollars.
C. 140 dollars.
D. 20 dollars
Hint
Opportunity cost is the value of the next-highest-valued alternative you give up when making a choice.Answer
B. 80 dollars. Lisa’s opportunity cost of writing the term paper is 80 which is the value of going out with a friend which is the alternative with the highest value.Question 2
The price of gasoline is \$2.50 per gallon at the closest gas station, but is only \$2.30 per gallon at a gas station two miles away. By driving to the farther gas station, the opportunity cost is:
A. \$0.20 per gallon, the difference in price between the two gas stations.
B. the value of one’s time and expenses to go to the farther gas station.
C. non-existent because gas is cheaper at the farther station.
D. the cost of filling one’s tank at the original price of \$2.50 per gallon.
Hint
What are you giving up to save the \$0.20 per gallon?Answer
B. the value of one’s time and expenses to go to the farther gas station. The opportunity cost of getting the gas for \$0.20 cheaper per gallon is the extra time and expenses you incur to go to the farther gas station.How much do you value your time if you spend an extra 10 minutes driving to a gas station to save \$0.20 per gallon?
Question 3
Instead of attending class, one could have worked an extra hour at the café for \$10 or watched a neighbor’s child for \$15. The opportunity cost of attending class is:
A. \$5.
B. \$25.
C. \$10.
D. \$15.
Hint
The opportunity cost of a choice is what you give up in forgoing the next highest valued alternative.Answer
D. \$15. The opportunity cost is \$15 since you give up \$15 in watching your neighbor's child to attend class which is the highest valued alternative you gave up.Question 4
When four roommates agree to specialize in the chores they are most efficient at, this can lead to:
A. a situation in which less time is spent on chores by every roommate.
B. some roommates doing many more chores than others.
C. one roommate who is most efficient doing all of the chores.
D. no chores getting done at all.
Hint
Specialization can lead to a more efficient outcome for everyone.Answer
A. a situation in which less time is spent on chores by every roommate. Specializing can lead to a better outcome for everyone. If all your roommates or family equally share in all chores, then you may spend more time overall working on chores. If you specialize, then you may be able to decrease the total amount of time everyone spends doing chores. For example, if you only do the laundry then you may get really good at doing the laundry and know how to quickly get it done (even folding fitted sheets!). Likewise, everyone else gets really good at what they specialize in and all of you can benefit from your comparative advantages.Question 5
Which of the following is a decision that follows the net marginal benefit principle?
A. Choosing among different roller coasters based on their distance from the theme park entrance.
B. Choosing to give up eating meat due to concerns regarding the treatment of animals.
C. Deciding whether to spend one more hour studying for an exam.
D. Deciding to order a dessert at a non-buffet restaurant more often than you have dessert at a buffet.