Quiz 1 1 If one fails to account for implicit costs in decision making then applying the cost benefit rule will be flawed because the benefits will be overstated the costs will be understated the benefits will be understated the costs will be overstated 2 Jen pays 1 to rent beach umbrella 9 for food drinks 10 for transport Best alternative she does not go to the beach go to the movies ticket refreshments transport 20 The implicit cost of going to the beach is the 20 spent on umbrella food drinks transport the 20 she will spend going to the movie the value she places on watching the movie the value she places on watching the movie the 20 spent on umbrella food drinks transport 3 Refer to MB MC graph Which of the following statements is false Total economic surplus is maximised when society deploys Q0 quantity of resources Society is presently allocating Q1 quantity of resources TES will increase deadweight loss will decrease if society reduces allocation of resources Society is presently allocating Q1 quantity of resources TES will increase deadweight loss will decrease if society increases allocation of resources Society is presently allocating Q2 quantity of resources TES will increase deadweight loss will decrease if society reduces allocation of resources 4 Refer to MB MC graph Which of the following statements is true The shape of MB curve is due to the law of increasing opportunity costs The shape of MC curve is due to the law of diminishing marginal utility or the law of diminishing returns Society will not experience scarcity if it maximises total economic surplus by allocating Q0 quantity of resources There is no deadweight loss if society allocates Q0 quantity of resources 5 Based on economic theory attached diagram the approach used to determine optimal quality of resources to allocate to crime control prevention law enforcement in society is primarily based on the Scarcity Principle the Cost benefit Principle the Law of Increasing Opportunity Costs the Law of Diminishing Returns ignoring sunk cost in economic decision making the pitfall of ignoring implicit costs in economic analysis the Scarcity Principle normative economic analysis 6 Chris is deciding on 1 of 3 alternatives a work on an essay that is due soon b work at a restaurant to earn additional income to pay for university tuition c swimming training Chris situation is an example of 7 Which of the following statements about the Incentive Principle is untrue Entities are more likely to act when the benefits associated with that course of action increases Entities are less likely to act when the costs associated with that course of action increases Entities are more likely to act when the benefits associated with that course of action decreases Entities are more likely to act when the costs associated with that course of action decreases 8 Microeconomics is distinguished from macroeconomic mainly by its emphasis on the following topic Scarcity Principle Cost benefit Principle Pricing output of goods services in individual markets Total output of goods services produced by all producers 9 A person should be allowed to attend school even if the marginal cost to society of educating that person is higher than the marginal benefit of educating that person This is an application of positive economic analysis 10 If marginal benefit is higher than marginal cost there will be no deadweight losses economic surplus is not maximised True False