Opportunity cost is best defined as
A) the sum of the dollar values of all alternatives given up when choices are made.
B) the cost of producing the purchased goods.
C) the next highest valued alternative when a choice is made.
D) the dollar price of the purchased item.
Ques. 2Which of the following is an example of money illusion?
A) An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 5 percent.
B) An individual is willing to work more hours when the nominal wage rises by 10 percent and the overall price level rises by 20 percent.
C) An individual will neither increase nor decrease the number of hours she is willing to work when the nominal wage rises by 10 percent and the overall price level rises by 10 percent.
D) none of the above
Ques. 3In 1950, a phone call at a pay phone cost 5 cents and a first-class stamp cost 3 cents. Today, those prices are 50 cents and 49 cents respectively.
What has happened to the price of each good relative to the other? What has happened to the price of each good relative to all other goods?
Ques. 4The threat of a large fine for failure to pay income taxes is an example of
A) the excessive power of the Internal Revenue Service.
B) the ineffectiveness of incentives to get people to pay their taxes.
C) a negative incentive to get all people to pay taxes.
D) people failing to consider all the benefits the government provides them.
Ques. 5An increase in demand and an increase in supply will lead to
A) unambiguous increases in both price and quantity.
B) unambiguous decreases in both price and quantity.
C) an unambiguous increase in quantity, but the effect on price is indeterminate.
D) an unambiguous increase in price, but the effect on quantity is indeterminate.
Ques. 6The total civilian labor force is comprised of
A) the unemployed and the employed.
B) only the employed.
C) all individuals over 16 years of age, whether or not they work or are seeking work.
D) only full-time employed individuals between the ages of 18 and 55.
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