Burris EPF Unit 1 Review

Which of the following describes how economists recommend making decisions?

• Compare total costs to marginal costs
• Compare total benefits to marginal costs
• Compare marginal costs to total benefits
• Compare marginal cost to marginal benefit

An opportunity cost is best described as:

• The monetary value of your least valued option
• The value you place on your next best alternative
• The monetary cost of the option you choose
• The total monetary and non-monetary value of your least valued option

Which of the following scenarios best exemplifies someone falling into the sunk cost fallacy?

• Rachel, after noticing that her new shoes are uncomfortable and cause blisters, decides to continue wearing them because they were expensive.
• John, after losing money on a poor stock investment, decides to diversify his portfolio to mitigate future risks.
• Amy, after realizing that she bought a faulty laptop, decides to return it and get a refund.
• Michael, after seeing that the movie he is watching is not interesting, decides to leave the theater.

Which of the following is TRUE about economic growth?

• Economic growth has increased at a steady pace over the last 2,000 years.
• Economic growth fluctuates over time. On average, there has not been significant growth in the last 200 years.
• Most economic growth has occurred in the last 20 years.
• Economic growth started to exponentially increase sometime in the 1800s.

Suppose that you purchase a nonrefundable $15 movie ticket for tonight at 7:30 pm. After purchasing, you get a call from a friend inviting you to a concert tonight that they just won free tickets for. You value the concert ticket at $100. What is your opportunity cost of seeing the movie?

• $100
• $85
• $15
• $115

Suppose that you buy a house to renovate. Which of the following is a sunk cost?

• The realtor fee you paid when you purchased the house
• The resale value of the house
• The expected cost of replacing the roof
• The value of your friend’s time who have offered to come help you rip out old carpets

Which of the following is positively correlated with economic growth?

• Literacy
• Life expectancy
• Happiness
• All of the above

Which of the following is true about the unintended consequences of government policies?

• Unintended consequences only impact the parties directly addressed by a government policy.
• Unintended consequences are infrequent and usually occur only when bills are rushed through Congress quickly.
• Unintended consequences occur because simple policies are attempting to influence a complex system of behaviors and outputs.
• Unintended consequences typically are benign and do not undermine a policy’s stated goals.

Which of the following is an example of an institution that encourages economic growth?

• Property rights that can hold up in court
• Unwritten rules that give preference to those in positions of social power
• Laws that require permission to introduce innovative products to the market.
• A constitution that is frequently disregarded by politicians

Which of the following is true about prices?

• Prices work best when they are set by a central authority.
• Prices coordinate behavior between buyers and sellers.
• Prices should always be based on the value of the labor used to produce the item.
• Prices should take into account fixed costs, but not variable costs of production.