Opportunity Cost & Incentives – Principles of Macroeconomics

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Opportunity Cost & Incentives, Shipping, Trade-offs – Macroeconomics Exam

The key terms in this Macroeconomics course include Shipping, Father’s Day Gift, Opportunity Cost, Macroeconomics, Incentives, Trade-offs, Microeconomics, Economy, Trade, Excise Tax, Consumers, demand curve, supply curve, Principles of Macroeconomics.


You order a $20 sweatshirt online for a Father’s Day gift. The shipping charge is $10. You can get free shipping if your order totals $25 or more.  Consequently, you order a $5 bobble head doll, even though neither you nor your father really likes bobble head dolls. This is an example of

opportunity cost.

incentives. – correct

trade-offs.

macroeconomics.

Explanation: Spending $25 gets you free shipping. If shipping on the $20 item is greater than $5, you may find something else to buy for $5, even if it is something you may not want. This is an example of incentives, because the web site offers you an incentive to spend more in order to save on shipping costs.

The difference between the study of microeconomics and the study of macroeconomics is a difference between

the study of individual economic units and the study of aspects of the economy as a whole. – correct

the study of government policy and the study of the private sector.

individuals and families.

single individuals and large companies.

Explanation: Microeconomics is the study of the individual units that make up the economy, whereas macroeconomics is the study of the overall aspects and workings of an economy.


Suppose that Tegan is good at cooking but not very good at cleaning up the kitchen afterward and that Sara is good at cleaning kitchens but not very good at cooking. Which of the following statements is true with regard to Tegan and Sara?

Sara should cook and clean up the kitchen.

Sara should cook and Tegan should clean up the kitchen.

Tegan should cook and Sara should clean up the kitchen. – correct

Tegan should cook and clean up the kitchen.

Explanation: If Tegan decided to specialize in cooking, she could trade meals to Sara in exchange for having the kitchen nice and clean. This shows gains from specialization and trade. Both people have a comparative advantage in doing one particular task. Since both people can specialize in what they do best, they are able to produce more value than if they tried to do both things themselves. 

According to the Food and Drug Administration, “…the ultraviolet (UV) radiation from these devices [sun lamps and tanning beds] poses serious health risks.” As a result of reading this, the local mayor decides to introduce legislation that will put a 10% excise tax on tanning consumers. From an economic point of view, this will

shift the demand curve leftward for tanning. – correct

shift the demand curve rightward for tanning.

shift the supply curve rightward for tanning.

move down along the demand curve for tanning.

Explanation: The excise tax lowers demand because consumers must now pay a higher tax in addition to the price they pay for the good. People will tan less because they now have to factor in the extra cost. This will be shown as a leftward shift of the demand curve.

You order a $20 sweatshirt online for a Father’s Day gift. The shipping charge is $10. You can get free shipping if your order totals $25 or more.  Consequently, you order a $5 bobble head doll, even though neither you nor your father really likes bobble head dolls. This is an example of

opportunity cost.

incentives. – correct

trade-offs.

macroeconomics.

Explanation: Spending $25 gets you free shipping. If shipping on the $20 item is greater than $5, you may find something else to buy for $5, even if it is something you may not want. This is an example of incentives, because the web site offers you an incentive to spend more in order to save on shipping costs.

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