tut02two-1 - Multiple Choice Tutorial Chapter 2 Economic...

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1 Multiple Choice Tutorial Chapter 2 Economic Tools and Economic Systems
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2 1. The opportunity cost of an activity is a. zero if you choose the activity voluntarily. b. the amount of money spent on the activity. c. the value of the best alternative not chosen. d. the sum of benefits from all of the sacrificed alternatives. C. All decision making is based on opportunity cost. The cost to you of any decision is that which you give up in the best alternative endeavor.
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3 2. The measure of the opportunity cost of going to college includes the costs of tuition, books, and a . housing. b. housing and food. c. earnings foregone by working less. C. If you are not working because you are a full time student, a part of the cost of your education is the money foregone by not working at the highest paying job you qualify for and you realistically could have obtained. If you are working part time, or at a job that pays you less because of your school schedule, your opportunity cost is the difference between what you are making and what you could have made if it were not for your school
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4 3. The net benefit of an activity is the a. value of benefits to others in the economy b. sum of all the benefits from that activity c. non-monetary benefits from that activity d. total benefits minus the total costs of that activity D. The term net means the difference between costs and benefits. Because there are costs and benefits in every activity you will engage in, you will either experience a net benefit or a net loss.
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5 4. Rational choices must be based on a. complete knowledge and correct information. b. the least amount of information possible. c. self-interest. d. expected opportunity cost. D. All decisions are based on expectations of the gains and costs of that decision. For every decision you make you ask yourself (sometimes unconsciously) “what will I have to give up for making this decision and how much will I gain?”
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6 5. The opportunity cost of an activity a. depends on the individual’s subjective values and opinions. b. is the same for everyone. c. must be calculated and known before undertaking the activity. A. Opportunity cost is a very personal thing, it differs from person to person. For example, should you paint your house or hire someone to paint it? If you can make $20 an hour and pay someone $8 an hour, you should hire the work out. However, if you can only make $7 an hour, it is better to paint the house yourself.
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7 6. Your opportunity cost when choosing a particular activity a. can be easily and accurately calculated b.cannot even be estimated c. does not change over time d. varies, depending on time and circumstances D. For example, the opportunity cost of cleaning your bedroom is higher on a sunny day then it would be on a rainy day. There are more things you can do outside when the sun is shining than you can do when it is raining.
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8 7. Sunk costs a. are the most important consideration in rational decision making b. should be ignored when making economic choices c. are incurred only if you choose that activity d. may be recovered if you do not choose
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tut02two-1 - Multiple Choice Tutorial Chapter 2 Economic...

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