Chapter 2

Question 1

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _______ the payoff from devoting additional resources to that activity.

Answer 1

Smaller

Question 2

Which of these is a positive economic statement?
a) The government should do something to help the homeless
b) If minimum wage rates rise, then unemployment will rise.
c) Full employment policies should be pursued.

Answer 2

b) if minimum wage rates rise, then unemployment will rise.

Question 3

If a theory states that consumers buy 100 ice cream cones per day when the price is $2 each, then ________.
a) Both the quantity bought and the price are exogenous
b) Weather is an exogenous variable
c) Price is an exogenous variable
d) the quantity bought is an exogenous variable

Answer 3

b) weather is an exogenous variable

Question 4

If Y = 800 – 4X, what is the slope of this line?

Answer 4

the sope is -4

Question 5

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _______ the payoff from devoting additional resources to that activity.
a)More proportional
b) Greater
c) Smaller
d) More instant

Answer 5

c) smaller
- ex. farming: when a farmer plants a crop, he will more than likely use the best and most fertile land first. However, as production expands, he will be forced to use land that required more preparation, fertilizers, and use of equipment but generates smaller yields.

Question 6

The slope at a line tangential to the maximum or minimum of a nonlinear curve will always be equal to ________.
a) zero
b) positive number
c) negative number
d) one

Answer 6

a) zero
- when a nonlinear curve reaches a peak (a max) and starts back down then a line drawn tangential to that point would be perfectly horizontal. A horizontal line has a zero slope.

Question 7

The slope of a straight line equals the change in the value on the __________ axis __________ by the change in the value of the other axis measured between any two points on the line.
a) vertical, divided
b) vertical, multiplied
c) horizontal, multiplied
d) horizontal, divided

Answer 7

a) vertical, divided
- rise/run (vertical/hoizontal)

Question 8

What is the percentage change in price for a shirt that was marked down from $40 to $28?
a) 30%
b) -43%
c)-30%
d) 70%

Answer 8

c) -30%
to find the percentage change, you do new price - old price/old price x100