Additional Business – Principles of Macroeconomics Exam 1

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Neighbor, Opportunity Cost, Additional Business, Principles of Macroeconomics Exam 1

The key terms in this Principles of Macroeconomics course include Neighbor, Rake the Leaves, Opportunity Cost, Additional Business, Hire, Values His Time, Major, High


Nicole asked her neighbor to rake the leaves on his lawn because they were blowing into her yard. It takes an hour to rake the yard, regardless of who performs the task. He responded that it wouldn’t be rational for him to do so, but he would be willing to hire someone else to rake. Why would this be the case?

Her neighbor is a high school teacher and values his time at $15 an hour, and he knows that he can hire one of his students to rake leaves for $20 an hour.

Her neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job.

Her neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour.

Her neighbor is getting revenge on her because Nicole didn’t rake the leaves on her lawn last year.

Her neighbor is a busy person and doesn’t have time to rake leaves.


When Lucy chose a major, she likely thought about her skills. Let’s say Lucy doesn’t enjoy dealing with numbers. How could she explain to her parents, using logic from economics, why she chose to major in English instead of mathematics?

The expected value of a major in mathematics after graduation is high.

The opportunity cost of learning mathematics is too high.

The opportunity cost of going to college is too low.

The opportunity cost of learning to appreciate literature is too high.

The expected value of a major in English after graduation is low.


Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing. Based on his knowledge of operations, the 1,000 th piece of clothing costs him $4.95 to dry-clean. If he takes additional business, however, the 1,001st piece will cost $5 for the service. Does he take the additional business?

Yes, if he turns away business, his service will be forced to close.

Yes. At a $5 cost, he breaks even and is indifferent. He necessarily turns away business when the cost of the additional unit exceeds the income.

No, he has hidden costs that far exceed his estimate of $5, so he loses money.

Maybe. If a competitor is accepting that many customers, he must at least equal that amount.

No, taking on additional business doesn’t earn him any money.


According to economic thinking, the presence of scarcity requires

unintended consequences.

incentives.

choices.

a dismal outlook.

intelligence.


Nicole asked her neighbor to rake the leaves on his lawn because they were blowing into her yard. It takes an hour to rake the yard, regardless of who performs the task. He responded that it wouldn’t be rational for him to do so, but he would be willing to hire someone else to rake. Why would this be the case?

Her neighbor is a high school teacher and values his time at $15 an hour, and he knows that he can hire one of his students to rake leaves for $20 an hour.

Her neighbor lacks the equipment to rake leaves and thinks it would take too long to do the job.

Her neighbor is a lawyer who values his time at $200 an hour and knows that he can hire a high school kid to rake leaves for $20 an hour.

Her neighbor is getting revenge on her because Nicole didn’t rake the leaves on her lawn last year.

Her neighbor is a busy person and doesn’t have time to rake leaves.


When Lucy chose a major, she likely thought about her skills. Let’s say Lucy doesn’t enjoy dealing with numbers. How could she explain to her parents, using logic from economics, why she chose to major in English instead of mathematics?

The expected value of a major in mathematics after graduation is high.

The opportunity cost of learning mathematics is too high.

The opportunity cost of going to college is too low.

The opportunity cost of learning to appreciate literature is too high.

The expected value of a major in English after graduation is low.


Rodrigo operates a dry-cleaning service and charges customers $5 per article of clothing. Based on his knowledge of operations, the 1,000 th piece of clothing costs him $4.95 to dry-clean. If he takes additional business, however, the 1,001st piece will cost $5 for the service. Does he take the additional business?

Yes, if he turns away business, his service will be forced to close.

Yes. At a $5 cost, he breaks even and is indifferent. He necessarily turns away business when the cost of the additional unit exceeds the income.

No, he has hidden costs that far exceed his estimate of $5, so he loses money.

Maybe. If a competitor is accepting that many customers, he must at least equal that amount.

No, taking on additional business doesn’t earn him any money.


According to economic thinking, the presence of scarcity requires

unintended consequences.

incentives.

choices.

a dismal outlook.

intelligence.