Liberty University ECON 213 InQuizitive chapter 1 complete solutions correct answers updated

Liberty University ECON 213 InQuizitive ch. 1 complete solutions correct answers A+ work

Chapter 1: Five Foundations of Economics

In a –-based economy, transactions require that each party have something the other desires. – increases market – by serving as a common commodity everyone wants. Now a transaction requires only that the – have something the – desires and that the buyer have enough money to pay the seller’s asking price.

Which common saying best captures the concept of incentives (specifically, positive and negative incentives), which is one of the foundations of economics?

Which of the items listed fit the definition of a market?

Arshad is trying to choose his college major. His options are physics, civil engineering, biology, and communications. He is leaning towards communications because he enjoys those classes, but is also concerned about his midcareer salary. Of his options, click on the major that represents Arshad’s opportunity cost of choosing to major in communications.

Match each term to its correct definition.

the study of the overall aspects and workings of an economy the study of how people allocate limited resources the study of the individual units that make up the economy

Arrange the circumstances chronologically to illustrate how opportunity costs for the fan described below drive down the numbers of emergency room visits during Boston Red Sox baseball playoff games.

Place the events in order to describe the unintended consequences of a government-created incentive.

1.

5 foundations of economics

2.

Alicia and Christine are doctors at a hospital and can each perform two tasks: open-heart surgery and liver transplants. Alicia is more efficient than Christine at both of these two tasks, but Alicia has a lower opportunity cost in performing liver transplants. Identify the actions that lead to the the hospital seeing more patients.

3.

Another word for (1)_____ incentives is "rewards." Generally, these become more effective when coupled with (2)_____ incentives. For example, a (3)______ grade in a class means more when it is possible to get a (4)_____ grade.

4.

Arrange the items in order to illustrate, using one fan's experience, how opportunity costs drive down the numbers of Boston ER visits during Red Sox playoff games

5.

Calvin and Hobbes run a company that sells wallet chains and wallet decals. Calvin is faster at making decals than chains, and Hobbes is faster at making chains than decals. Which statements accurately describe the situation?

6.

Caroline has several options for how to spend her Saturday night, listed in order of descending preference:
1. Go to a folk music concert with a friend
2. Get dinner with several of her sorority sisters
3. Go shopping with her mom
4. Study for an exam she will take on Monday

Caroline can only do one activity. Match each activity with its opportunity cost

7.

The study of how people allocate limited resources

8.

The study of the overall aspects and workings of an economy

9.

The study of the individual units that make up the economy

10.

-Frequent flier points awarded by airlines
-Car alarms to discourage break-ins

11.

Eleanor works at a department store and is paid by the hour. When not at work, she likes to spend time reading at home. During the holiday season, Eleanor can work as many hours as she wants due to the increased customer traffic. The store recently increased her hourly wage. Complete the passage describing Eleanor's situation:

The increased hourly wage acts as – to work – hours. The wage increase causes the opportunity cost of reading at home to –.

12.

A football game between the Thunder and the Sharks is in its closing minutes, with the Thunder ahead by 20 points. The Thunder's coach considers sending in the second-string quarterback. This would reduce the risk of the star quarterback getting injured, but the second-string quarterback is not very good. Complete the passage describing the coach's decision in economic terms:

The coach is weighing a slightly – risk of losing against a slightly decreased risk of injury to the star quarterback. This weighing of –is an example of –, because the star quarterback was in for most of the game, and the coach’s decision concerns – shifts in probabilities with the game nearly over.

14.

In a 1953 speech, President Dwight Eisenhower listed some things that cost about as much as "one modern day heavy-duty bomber": a modern urban school, a couple of power plants or hospitals, or 50 miles of a highway. What points was he trying to make?

15.

Indirect Incentive examples

16.

Iowa has a ( 1 ) in producing corn. We would expect Texas to produce ( 2 ) and trade it for ( 3 ). If these states do not trade, cotton and corn production will be ( 4 ) than if the states did trade.

17.

Looking to invest in his first pair of leather dress shoes, Sean is deciding between some Alden slip-ons and some Allen Edmonds wingtips. The Aldens are more expensive. What is included in the opportunity cost of buying the Aldens?

18.

-The inflation rate rises
-Nationwide, new housing construction declines for the third month in a row

19.

-A shopping mall
-A swap meet
-eBay

20.

-A laid-off worker enrolls in job re-training
-A team of three partners starts a new ad agency

21.

-A city will fine a homeowner if the lawn around the house is overgrown
-A boy faces a time out if he doesn't clean his room

22.

On one hand, (1)____ are almost always limited, while on the other hand, (2)_____ are practically unlimited. We describe this situation by saying that a condition of (3)_____ exists, which leads to a resource (4)_____ problem.

23.

Pharmaceutical companies are perceived as profiting unfairly from drugs they sell. A new law shortens the time during which the manufacturer has exclusive use of the drug formula. Place the events in sequence to illustrate how restricting profits by pharmaceutical companies affects innovation.

24.

Positive incentive examples:

25.

The slogan "Information wants to be free" is sometimes used to justify unrestricted (1)_____ of copyrighted materials, such as music. The (2)______ this practice is that depriving musicians of revenue from the sale of their work (3)_____ an incentive for them to be creative, which means a (4)______ supply of music for everyone.

26.

T/F
A commodity that buyers and sellers both have will increase the efficiency of the market

27.

T/F? 
At the end of the semester, a student values his used textbook at $75. This student would be willing to resell his used textbook if the price he receives is $36.

28.

T/F
Because resources are scarce, all choices involve trade-offs, which means nothing is free.

29.

What elements in a society are required for economic study?

31.

Which description best captures the idea of marginal thinking?

32.

Which is true of economically beneficial specialization?

33.

Which items are consequences of globalized trade for a developed nation that begins to import more goods and services from less-developed countries?

1.

Alicia and Christine are doctors at a hospital and can each perform two tasks: open-heart surgery and liver transplants. Alicia is more efficient than Christine at both of these two tasks, but Alicia has a lower opportunity cost in performing liver transplants. Identify the actions that lead to the hospital seeing more patients.

2.

Arshad is trying to choose his college major. His options are economics, civil engineering, biology, and communications. Arshad cares about the level of his midcareer salary. Of his options, click on the major that represents Arshad's opportunity cost if he chooses to major in communications.

3.

At the end of the semester, a student values his used textbook at $75. This student would be willing to resell his used textbook if the price he receives is $36.

4.

Because resources are scarce, all choices involve trade-offs, which means nothing is free.

5.

Calvin and Hobbes run a company that sells wallet chains and wallet decals. Calvin is faster at making decals than chains, and Hobbes is faster at making chains than decals. Which statements accurately describe the situation?

6.

Caroline has several options for how to spend her Saturday night, listed in order of descending preference:
1. Go to a folk music concert with a friend.
2. Get dinner with several of her sorority sisters.
3. Go shopping with her mom.
4. Study for an exam she will take on Monday.

Caroline can only do one activity. Match each activity (on the left) with its opportunity cost (on the right).

7.

Eleanor works at a department store and is paid by the hour. When not at work, she likes to spend time reading at home. During the holiday season, Eleanor can work as many hours as she wants due to the increased customer traffic. The store recently increased her hourly wage. Complete the passage describing Eleanor's situation.

8.

A football game between the Thunder and the Sharks is in its closing minutes, with the Thunder ahead by 20 points. The Thunder's coach considers sending in the second-string quarterback. This would reduce the risk of the star quarterback getting injured, but the second-string quarterback is not very good. Complete the passage describing the coach's decision in economic terms.

9.

Iowa's soil and climate are better suited for growing corn than for growing cotton, while in Texas the opposite is true. Complete the passage about the situation each state is in.

10.

Label each incentive as positive or negative.

11.

Pharmaceutical companies are perceived as profiting unfairly from drugs they sell. A new law shortens the time during which the manufacturer has exclusive use of the drug formula. Place the events in sequence to illustrate how restricting profits by pharmaceutical companies affects innovation.

12.

Place the appropriate label to classify each scenario as either microeconomic or macroeconomic.

13.

When Australia offered a $3,000 "baby bonus" for infants born on or after a certain date in 2004, it had an unintended effect. Right before that date, hundreds of expectant mothers delayed delivery a few days, by means such as bed rest and postponed caesarian sections, in order to be eligible for the money. In some cases, this may not have been in the child's best interests.

Click on the point where the delays were happening

15.

Which description best captures the idea of marginal thinking?

16.

Which of the following elements in a society are required for economic study?

17.

Which of the following is true of economically beneficial specialization?

18.

Which of the following items describe ways of classifying incentives, from an economist's point of view?

1.

Adam prefers activities and goods in the following descending order:
1. Hanging out with friends.
2. Having milkshakes with his mom.
3. Playing video games.
4. Eating fried chicken.
Adam's mom has several chores she wants him to finish. Place the incentives in order, from most effective to least effective, that will encourage Adam to finish his chores.
-promising to go with Adam to get milkshakes when he finishes the chores
-promising Adam a fried chicken dinner after he gets done with chores
-Taking away Adam's video game until he finishes chores
-not letting Adam leave home or have visitors until he finishes the chores

2.

Caroline has several options for how to spend her Saturday night, listed in order of descending preference:
Go to a folk music concert with a friend.
Get dinner with several of her sorority sisters.
Go shopping with her mom.
Caroline can only do one activity. 
-dinner with sorority sisters
-shopping with mom
-folk music concert

3.

The coach is weighing a slightly ____ risk of losing against a slightly decreased risk of injury to the star quarterback. This weighing of ____ is an example of _____, because the star quarterback was in for most of the game, and the coach's decision concerns ____ shifts in probabilities with the game nearly over.
-incentives
-trade-offs
-large
-decreased
-marginal thinking
-increased
-small

4.

Identify each item as an example of a direct or an indirect incentive.
-high corporate income tax rates
-frequents flier points awarded by airlines
-government-funded debt relief for college graduates
-car alarms to discourage break-ins

5.

The increased hourly wage acts as ____ to work _____ hours. The wage increase causes the opportunity cost of reading at home to _____.
-fewer
-decrease
-a trade-off
-increase
-a direct incentive
-more
-a negative incentive
-an indirect incentive

6.

Looking to invest in his first pair of leather dress shoes, Sean is deciding between some Alden slip-ons and some Allen Edmonds wingtips. The Aldens are more expensive. What is included in the opportunity cost of buying the Aldens?
- the classic, snazzy look that comes with wearing wingtips
-the pride that comes with wearing a pair of Alden shoes
-the money that would be spent to buy wingtips
-the savings that would come from buying the wingtips
-the no-lace convenience of slip-ons

7.

microeconomic or macroeconomic: A laid-off worker enrolls in job re-training.

8.

microeconomic or macroeconomic: A team of three partners starts a new ad agency.

9.

microeconomic or macroeconomic: Nationwide, new housing construction declines for the third month in a row.

10.

microeconomic or macroeconomic: The inflation rate rises

11.

On one hand, _____ are almost always limited, while on the other hand, _____ are practically unlimited. We describe this situation by saying that a condition of _____ exists, which leads to a resource _____ problem.

-allocation
-our wants and needs
-scarcity
-resources
-plentitude

12.

the study of how people allocate limited resources

13.

the study of the individual units that make up the economy

14.

the study of the overall aspects and workings of an economy

15.

true or false: A commodity that buyers and sellers both have will increase the efficiency of the market.

16.

which items fit definition of a market? 
-eBay
-restaurant 
-shopping mall
-swap meet
-hair salon

17.

Which of the following elements in a society are required for economic study?
1. a standardized medium of exchange (money)
2. resources in limited supply
3. people with wants and needs
4. a system of government
5. decisions about how to allocate resources

18.

Which of the following is true of economically beneficial specialization?
-each worker does whatever involves the lowest opportunity cost with other tasks
-each worker does whatever he/she is best at, compared to other people
-each worked does whatever involves the greatest comparative advantage
-each worked does whatever he/she does best, compared to other tasks

19.

Which of the following items describe ways of classifying incentives according to their different types, from an economist's point of view?
-indirect
-positive
-direct
-negative
-rational
-irrational