Econ 103- Exam 1 (Chapters 1-4) with Complete Solutions

the opportunity cost of an item is - ANSWER-what you give up to get that item ellie decides to spend two hours taking a nap rather than attending her classes. her opportunity cost of napping is - ANSWER-the value of the knowledge she would have received had she attended class when you calculate your true costs of going to college, what portion of your room and board expenses should be included - ANSWER-you should include only the amount by which your room and board expenses exceed the expenses for rent and food if you were not in college suppose the state of Wisconsin passes a law that increases the tax on alcoholic beverages. as a result, residents in Wisconsin start purchasing their alcohol in surrounding states. which principle does this best illustrate - ANSWER-people respond to incentives suppose that a country has a high level of output per person agrees to trade with a country that has a low level of output per person which country can benefit - ANSWER-both market failure can be caused by - ANSWER-externalities and market power thousands of people develop lung cancer from second hand exposure to cigarette smoke this is an example of - ANSWER-a market failure caused by an externality for markets to work well there must be - ANSWER-property rights you are considering staying in college another semester so that you can complete a major in economics. in deciding whether or not to stay you should - ANSWER-compare the cost of staying one more semester to the benefits of staying one more semester