Question

8. Darlene decides to spend two hours sunbathing in the afternoon rather than working at her job which pays $10 per hour. Darlene’s tradeoff is
A. the beautiful tan she obtains from sunbathing for those two hours.
B. the $20 she could have earned working for two hours.
C. nothing, because she enjoys sunbathing more than working.
D. nothing, because she enjoys working more than sunbathing.
E. nothing, because she spent $20 for suntan lotion and cold beverages to consume as she sunbathes.

9. Which of the following statements is (are) correct?
(x) The opportunity cost of the U.S. “homeland security” program is whatever other goods and services could have been produced with the resources devoted to the homeland security program.
(y) In general, the opportunity cost of going to college is less than zero for students who are fortunate enough to have all of their college expenses paid by someone else.
(z) Quincy decides to spend an hour playing basketball rather than working at $8 per hour. His opportunity cost is zero, because he enjoys playing basketball more than working.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

10. Which of the following best describes an assumption economists make about human behavior?
A. Individuals act rationally all the time in all circumstances.
B. Assuming rational behavior is useful in explaining choices people make even though people may not behave rationally all of the time.
C. Individuals act randomly so economists do not find it useful to assume that people act rationally when analyzing decision making by consumers.
D. People weigh religious aspects in all decisions they make.
E. Both C and D.

Answer 1

Answer-9

CORRECT OPTION: B) the $20 she could have earned working for two hours .

EXPLANATION:

The trade off faced by any person is the result of too many choices available with him. A trade-off arises where having more of one thing potentially results in having less of another. In this case, Darelene while deciding to spend two hours sunbathing in the afternoon, she actually gives up the opportunity to earn $20 by working for 2 hours instead of sunbathing. So option (b) is correct.

Answer- 10

CORRECT OPTION: (E)

EXPLANATION-

Only statement (X) is true. Since opportunity Cost is the cost of second best alternative foregone. When U.S. decides to devote the scarce resources of the country to the U.S. Homeland Security Program, there is essentially an opportunity cost associated with this decision which is the amount of goods and services that could have been produced using those resources.

Statement (y) is not true. Since opportunity cost deals with the cost of the next alternative foregone, it has nothing to do with the students who don’t have to pay for their expenses at their own. Opportunity cost is simply associated with the cost of chosen alternative in terms of the alternative foregone.

Statement (Z) is incorrect. This is so because Quincy might prefer playing than working, but the income she could have earned from work is the opportunity cost of playing basketball. So her opportunity cost is not zero.