coming to class today?
ANSWER: Whatever must be given up to obtain some item it its opportunity cost. Basically, this
would be a person's second choice. The opportunity cost of a person attending college is
the value of the best alternative use of that person's time, as well as the additional costs the
person incurs by making the choice to attend college. For most students this would be the
income the student gives up by not working plus the cost of tuition and books, and any
other costs they incur by attending college that they would not incur if they chose not to
attend college. A student's opportunity cost of coming to class was the value of the best
opportunity the student gave up. (For most students, that seems to be sleep.)
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.302 - Identify the opportunity cost of an action.
TOPICS: Economic thinking
Opportunity cost
KEYWORDS: BLOOM'S: Comprehension
CUSTOM ID: 053.01 - SAE - MANK08
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54. With the understanding that people respond to incentives, outline the possible outcome for teachers if the K-12 school
year is extended to 11 months per year instead of the existing 9 months per year.
ANSWER: The concept of working longer per year would be perceived by many teachers as a definite
increase in the cost of teaching. Even with additional compensation, many teachers look at
summers off as a major benefit of the education profession. If this benefit were eliminated
or diminished, some teachers may perceive that the marginal cost of teaching would now
be greater than the marginal benefit and would choose to leave teaching.
DIFFICULTY: Challenging
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
Incentives
KEYWORDS: BLOOM'S: Analysis
CUSTOM ID: 054.01 - SAE - MANK08
55. Under what conditions might government intervention in a market economy improve the economy’s performance?
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ANSWER: If there is a market failure, such as an externality or monopoly, government regulation
might improve the well-being of society by promoting efficiency. If the distribution of
income or wealth is considered to be unfair by society, government intervention might
achieve a more equal distribution of economic well-being.
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.014 - Assess a market's efficiency.
TOPICS: Economic thinking
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 055.01 - SAE - MANK08
56. Explain how an attempt by the government to lower inflation could cause unemployment to increase in the short-run.
ANSWER: To lower inflation, the government may choose to reduce the money supply in the
economy. When the money supply is reduced, prices don't adjust immediately. Lower
spending, combined with prices that are too high, reduces sales and causes workers to be
laid off. Hence, the lower price level is associated with higher unemployment.
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.102 - Examine the trade-off between inflation and unemployment.
TOPICS: Price levels
Inflation
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 056.01 - SAE - MANK08