Quiz 9: Decision Making by Individuals and Firms

Jacquelyn is a student at a major state university.Which factor is NOT an explicit cost of her attending college? A)Opportunity cost may be larger than monetary cost. B)Opportunity cost includes both explicit and implicit costs. C)The real or opportunity cost of something is what you must give up to get it. D)Opportunity cost is synonymous with explicit cost.

Money that must be paid for the use of factors of production such as labor and capital is an: A)explicit cost. B)accounting profit. C)implicit cost. D)economic profit.

Costs that are included in the economic concept of cost but that are NOT explicit costs are: A)outlay costs. B)accounting profits. C)implicit costs. D)economic profits.

Expenses associated with factors of production may be _____ costs. A)implicit B)opportunity C)explicit D)implicit,opportunity,or explicit

Accountants use only _____ costs in their computations. A)opportunity B)implicit C)explicit D)variable

You own a small deli that sells sandwiches,salads,and soup.Which factor is an implicit cost of the business? A)wages paid to part-time employees B)the job offer you did not accept at a local catering service C)bread,meat,and vegetables used to produce the items on your menu D)your monthly utility bill

The implicit cost of capital is: A)the expense associated with leasing machines. B)the expense associated with buying machines. C)the opportunity cost of capital used by a business. D)irrelevant for determining economic profit.

Suppose the Chicago Cubs could rent out Wrigley Field (the field they play on)to local youth leagues for $11,000 per month.The $11,000 per month is the _____ cost of capital. A)implicit B)explicit C)direct D)total

In central Florida,the demand for real estate has been increasing rapidly for years.Therefore,the _____ cost of capital is _____ in central Florida's orange groves. A)explicit;decreasing B)implicit;increasing C)implicit;decreasing D)explicit;increasing

John's accountant tells him that he made a profit of $43,002 running a pottery studio in Orlando.John's wife,an economist,claims John lost $43,002 running his pottery studio.This means his wife is claiming that he incurred _____ in _____ costs. A)$86,004;implicit B)$43,002;implicit C)$43,002;explicit D)$86,004;explicit

Accounting profit differs from economic profit because: A)of differences in the manner in which revenue is calculated. B)economic costs include explicit costs,while accounting costs do not. C)accounting costs are generally higher than economic costs because accounting costs include explicit and implicit costs,while economic costs include only explicit costs. D)economic costs are generally higher than accounting costs because economic costs include all opportunity costs,while accounting costs include explicit costs only.

If the accounting profit for a firm is negative,the: A)economic profit must be positive. B)economic profit must be negative. C)firm should produce more. D)firm will not owe any taxes.

Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year.If the store earned an economic profit of $50,000 last year,this means that the store's accounting profit equaled: A)$94,000. B)$6,000. C)$2.05 million. D)$2.044 million.

Part of the _____ associated with the Chicago Cubs baseball team is their batting cages used in practice. A)labor B)land C)capital D)entrepreneurship

For MOST firms,economic profit is: A)less than accounting profit. B)equal to accounting profit. C)greater than accounting profit. D)negative.

Profit computed without implicit costs is _____ profit. A)explicit B)accounting C)implicit D)economic

The implicit cost of capital is: A)the explicit cost of capital that the firm might have used but didn't need to. B)depreciation. C)the opportunity cost of the capital used by a business. D)the cost of human capital.

Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year.If the store earned an economic profit of $50,000 last year,the store's accounting profit equaled: A)$10,000. B)$50,000. C)$100,000. D)$200,000.

The dormitories of Eastland College are part of its: A)land. B)labor. C)capital. D)explicit costs.

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000.The potential revenue of the summer camps represents a(n): A)implicit cost of capital. B)explicit cost. C)total cost. D)sunk cost.

The costs economists use in the concept of economic profit are: A)accounting costs. B)strictly dollar costs,not opportunity costs. C)only implicit costs. D)accounting costs and implicit costs (i.e. ,the value of the best opportunity forgone).

Economic profit is: A)less than accounting profit if implicit costs exist. B)always equal to accounting profit. C)greater than accounting profit if implicit costs exist. D)less than accounting profit if implicit costs are zero.

Profit is the difference between _____ and _____. A)total sales;total revenues B)total profits;total costs C)total revenues;total costs D)marginal costs;marginal revenues

Accountants use only _____ costs in their computations of short-run total cost. A)opportunity B)implicit C)explicit D)variable

Which question BEST describes a "how much" decision? A)Should I drive to work or ride my bicycle? B)Should I rent a movie or watch a baseball game on television? C)Should I attend graduate school or immediately enter the labor force? D)Should I buy a third hot dog?

An "either-or" decision entails: A)deciding how much of an activity to do. B)a choice between two activities. C)calculating marginal costs for each activity. D)calculating the marginal benefits for each activity.

In making an "either-or" decision: A)choose the activity that results in the greater economic profit. B)choose the activity that results in the greater accounting profit. C)continue in an activity as long as the marginal cost is greater than the marginal benefit. D)continue in an activity as long as the marginal cost is less than the marginal benefit.

Which statement describes an "either-or" decision? A)Allen must decide how many courses to take this semester. B)Sally must decide how many hours to spend studying for each of the four courses that she is taking this semester. C)Chris must decide how many hours to work each week at his part-time job. D)Dylan must decide whether to major in economics or finance.

Which statement describes a "how much" decision? A)Mary is trying to decide whether to go to work or go to college after she graduates from high school next month. B)Andrea is trying to decide whether to go to graduate school in economics or go to law school. C)Tim is trying to decide the amount of money to save each month to buy a new car next year. D)Andy is trying to decide whether to take a prep course for the Law School Admissions Test.

You decide to quit your $60,000-per-year job as an information technology specialist and illustrate children's books.At the end of the first year of illustrating,you have earned $20,000.You also spent $5,000 for paint and paper.Your economic profit in the first year as an illustrator is: A)$15,000. B)$20,000. C)-$40,000. D)-$45,000.

During its only year of operation,a firm collected $175,000 in revenue and spent $50,000 on raw materials,labor,and utilities.The owners of the firm spent $100,000 of their own money to build the firm's factory (instead of buying bonds and earning a 10% annual rate of return),which they sold at the end of the year for $100,000.The firm's economic profit is: A)$35,000. B)$125,000. C)$115,000. D)$25,000.

Until recently,Rosemarie worked as an accountant,earning $30,000 annually.Then she inherited a piece of commercial real estate that had been renting for $12,000 annually.Rosemarie decided to leave her job and operate a Peruvian restaurant in the space she inherited.At the end of the first year,her books showed total revenues of $260,000 and total costs of $230,000 for food,utilities,cooks,and other supplies.Her economic profit at the end of one year is: A)$230,000. B)$30,000. C)$0. D)-$12,000.

George owns a dude ranch in Texas.He pays $32,000 per year in insurance,$408,000 in wages,and $23,000 in supplies.He forgoes $32,000 per year he could make as a police officer.His total revenue last year equaled $460,000.That means his economic _____ equaled _____. A)profit;$3,000 B)losses;$3,000 C)losses;$35,000 D)profit;$35,000

Bessie wants to calculate the accounting and economic profits of her cattle farm in Nebraska.She pays $30,000 per year in overhead,$80,000 in wages,and $20,000 in insurance.She forgoes $30,000 per year that she could make as a teacher.If her total revenue equals $140,000,that means her accounting profit is _____ and her economic profit is _____. A)$10,000;-$20,000 B)$30,000;-$30,000 C)-$10,000;-$10,000 D)$60,000;$30,000

(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.The accounting profit of Wang's Wicker Furniture Store is: Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000. A)$200,000. B)$60,000. C)$30,000. D)$0.

(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.The implicit cost of capital for Wang's Wicker Furniture Store is: Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000. A)$0. B)$2,000. C)$5,000. D)$50,000.

(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.What is the opportunity cost of Wang's $100,000 inheritance being used to start his business? Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000. A)$0 B)$5,000 C)$10,000 D)$100,000

(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.What is the implicit cost of Wang's Wicker Furniture Store? Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000. A)$7,000 B)$60,000 C)$65,000 D)$69,000

(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.The economic profit of Wang's Wicker Furniture Store is: Scenario: Accounting and Economic Profit Rather than put the $100,000 that his grandmother left him in a mutual fund that earns 5% each year,Tommy Wang quit his job,which paid $60,000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20,000 for the year,purchased $60,000 in wicker furniture,and incurred costs of $40,000 for sales help and advertising.In his first year,his revenue was $150,000. A)$67,000. B)$0. C)-$20,000. D)-$35,000.

Andreas is a political consultant with his own firm.He travels the country and provides campaign advice for political candidates.Last year,he earned $250,000 in revenue for his services.He pays one employee $50,000 to manage the small office back home and pays $30,000 on rent and utilities for that office.His accountant tells him that if he sold all of the equipment,he could put that money in the bank and earn $3,000 in interest next year.Andreas also has received an offer to teach political science at a college at a salary of $100,000.Andreas's accounting profit is equal to _____,and his economic profit is equal to _____. A)$175,000;$67,000 B)$170,000;$67,000 C)$200,000;$72,000 D)$170,000;$70,000

The amount by which an additional unit of an activity increases total benefit is: A)net benefit. B)marginal benefit. C)marginal cost. D)utility.

The amount by which an additional unit of an activity increases total cost is: A)net benefit. B)marginal benefit. C)negative benefit. D)marginal cost.

In economics,a marginal value refers to: A)the value associated with an unimportant,or marginal,activity. B)a value entered as an explanatory item in the margin of a balance sheet or other accounts. C)the value associated with one more unit of an activity. D)a value that is most appropriately identified in a footnote.

In economic analysis,the principle of marginal analysis refers to: A)dividing large problems into smaller,more manageable ones. B)the notion that a group's problems can be effectively analyzed by focusing on only a small subsample of the group. C)the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost. D)the result that the optimal quantity of an activity is that at which the net benefit of the representative,or marginal,individual is maximized.

For which decision would marginal analysis be relevant? A)spending $1,000 on a summer vacation or on painting your house B)deciding how much to spend on a summer vacation C)buying a new car or a second-hand car D)eating dinner at home or going out to a restaurant for dinner

Marginal analysis is relevant for: A)both "either-or" and "how much" decisions. B)only "either-or" decisions. C)only "how much" decisions. D)only situations involving the time value of money.

A "how much" decision is BEST made by comparing the _____ of an action to the _____ of that action. A)explicit costs;implicit costs B)accounting profit;economic profit C)marginal benefits;marginal costs D)present value;net present value

Feng is thinking of mowing lawns over the summer.His friend Jason mows lawns,and he says the marginal cost of mowing the fourth lawn in a day is $40.Feng thinks about it and realizes that the total cost of mowing four lawns is: A)$160. B)$40. C)$80. D)not possible to determine from the information provided.

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.The marginal cost of the third slice is: A)$4.50. B)$10. C)$1. D)$2.

The _____ is the amount by which an additional unit of activity increases its total cost. A)marginal cost B)average cost C)average profit D)marginal benefit

Use the following to answer questions 51-55: -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the second sweatshirt is: A)$9. B)$20. C)$11. D)$29.

Use the following to answer questions 51-55: -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the third sweatshirt is: A)$33. B)$13. C)$11. D)$9.

Use the following to answer questions 51-55: -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the fourth sweatshirt is: A)$9. B)$20. C)$24. D)$15.

Use the following to answer questions 51-55: -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the fifth sweatshirt is: A)$17. B)$15. C)$13. D)$11.

Use the following to answer questions 51-55: -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of producing sweatshirts is an example of _____ marginal costs. A)decreasing B)increasing C)constant D)random

Constant marginal costs occur when production of each individual unit costs: A)less than the previous one. B)more than the previous one. C)the same as the previous one. D)more than the next one.

Learning effects often result in _____ marginal costs. A)decreasing B)increasing C)constant D)random

Tara notices that studying for one hour after class increases her economics grade by 11 points.The second hour yields a 7-point gain,the third hour yields a 4-point gain,and the fourth hour yields only a 1-point gain.This means that the marginal _____ of studying decreases with study hours. A)cost B)benefit C)opportunity cost D)time

Marginal benefit: A)is the subsidiary benefit from an activity;for example,the main benefit from weight training is an increase in muscle mass,and the subsidiary or marginal benefit might be a reduction in cholesterol. B)is the addition to total benefit due to undertaking one more unit of an activity. C)must be increasing if total benefit is increasing. D)normally increases as more of an activity is undertaken.

Wendy sells ice-making machines.She can sell six per week at a price of $2,000 per machine.If she charges $2,100 per machine,she will sell only five per week.The marginal benefit of selling the sixth ice-making machine is: A)$2,000. B)$2,100. C)$12,000. D)$1,500.

Use the following to answer questions 61-63: -(Figure: The Marginal Benefit Curve)Use Figure: The Marginal Benefit Curve.The total benefit of mowing four lawns is approximately: A)$25. B)$35. C)$80. D)$114.

Use the following to answer questions 61-63: -(Figure: The Marginal Benefit Curve)Use Figure: The Marginal Benefit Curve.The total benefit of mowing six lawns is approximately: A)$19. B)$35. C)$154. D)$200.

Use the following to answer questions 61-63: -(Figure: The Marginal Benefit Curve)Use Figure: The Marginal Benefit Curve.The total benefit of mowing seven lawns is approximately: A)$172. B)$140. C)$60. D)$18.

Use the following to answer questions 61-63: -The _____ benefit is the amount by which an additional unit of an activity increases its total benefit. A)average B)net C)marginal D)top

Use the following to answer questions 65-68: -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the second sweatshirt is: A)$31. B)$16. C)$15. D)$14.

Use the following to answer questions 65-68: -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the third sweatshirt is: A)$31. B)$16. C)$15. D)$14.

Use the following to answer questions 65-68: -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the fourth sweatshirt is: A)$58. B)$14. C)$13. D)$12.

Use the following to answer questions 65-68: -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the fifth sweatshirt is: A)$70. B)$14. C)$13. D)$12.

Whenever marginal benefit is less than marginal cost,the decision maker should do _____ of the activity. A)less B)that exact amount C)more D)none

In general,when marginal benefit is greater than marginal cost,the decision maker should do _____ of the activity. A)less B)that exact amount C)more D)none

Some highways have one lane;others have two,three,or more.If each lane costs $10 million per mile,an economist assumes that the total benefit of a three-lane highway must be _____ million per mile. A)less than $10 B)$10 to $20 C)$20 to $30 D)$30 or more

While eating pizza,you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice.You conclude that: A)you will be better off if you eat one more slice. B)you will be no better off and no worse off if you eat one more slice. C)you will be worse off if you eat one more slice. D)the total cost of eating the pizza will be more than the total benefit of eating the pizza.

Joan loves sushi.Her first piece of sushi normally gives her a marginal benefit of $5.Each additional piece yields a marginal benefit that declines by $0.25 per piece.If her favorite sushi bar charges $2.75 per piece of sushi,how many pieces should she eat? A)8 B)10 C)5 D)11

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.Sal orders two slices.From this we know that Sal's marginal benefit from the second slice must be at least _____ and the marginal benefit from the third slice must be less than _____. A)$3.50;$4.50 B)$3.50;$1.00 C)$1.50;$1.00 D)$1.50;$4.50

In economic analysis,at the optimal quantity of an activity: A)marginal benefit exceeds marginal cost by the greatest amount. B)total benefit equals total cost. C)marginal benefit equals total benefit. D)total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost.

Werner installs custom sound systems in cars.If he installs seven systems per day,his total costs are $300.If he installs eight systems per day,his total costs are $400.Werner will install eight sound systems per day only if the eighth customer is willing to pay at least: A)$300. B)$400. C)$100. D)$50.

Suppose Bob has a part-time business washing cars.He has washed nine cars on a given day;the marginal benefit of washing the tenth car is $20 and the marginal cost is $12.Bob should: A)wash the tenth car. B)not wash the tenth car. C)increase his marginal benefit. D)There is not enough information to decide.

To maximize her grade in economics,Stacey should study until her: A)marginal cost of studying begins to increase. B)marginal benefit of studying begins to decrease. C)marginal benefit of studying equals her marginal cost of studying. D)marginal cost of studying reaches zero.

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____. A)more than;an activity should be reduced B)less than;an activity should be reduced C)equal to;an activity should be reduced D)more than;net benefit is maximized

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____. A)more than;an activity should be increased B)less than;an activity should be reduced C)equal to;an activity should be reduced D)more than;net benefit is maximized

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____. A)more than;an activity should be reduced B)less than;an activity should be reduced C)equal to;an activity is being produced at the optimal quantity D)more than;net benefit is maximized

In economics,the assumption is that consumers and firms will make choices that maximize the _____ of each activity. A)total profit B)total benefit C)sum of total benefit and total cost D)product of total benefit and total cost

To maximize total profit from a particular activity,consumers and firms evaluate each activity at the: A)average. B)top. C)margin. D)end.

Total profit is maximized when marginal benefit _____ marginal cost. A)is more than B)is less than C)is equal to D)approaches

In economics,maximization of the total profit of an activity occurs when: A)MB = MC. B)MB > MC. C)MB < MC. D)MB approaches MC.

If at a given quantity _____,the decision maker should do _____ of the activity. A)MB < MC;that amount B)MB < MC;less C)MB > MC;less D)MB > MC;none

If at a given quantity _____,the decision maker should do _____ of the activity. A)MB < MC;that amount B)MB < MC;more C)MB > MC;more D)MB > MC;none

If at a given quantity MB = MC,the decision maker should do _____ of the activity. A)less B)that amount C)more D)none

If the marginal benefit received from consuming a good is equal to the marginal cost of production: A)society's well-being cannot be improved by changing production. B)society's well-being can be improved if production decreases. C)society's well-being can be improved if production increases. D)the market is producing too much of the good.

If the marginal benefit received from consuming a good is less than the marginal cost of production: A)society's well-being can be improved if production increases. B)society's well-being can be improved if production decreases. C)society's well-being cannot be improved by changing production. D)the market is producing too little of the good.

If the marginal benefit received from consuming a good is greater than the marginal cost of production: A)society's well-being can be improved if production increases. B)society's well-being can be improved if production decreases. C)society's well-being cannot be improved by changing production. D)the market is producing too much of the good.

Use the following to answer questions 92-93: -(Table: Marginal Analysis of Sweatshirt Production I)Use Table: Marginal Analysis of Sweatshirt Production I.The profit at the optimal quantity of sweatshirts is: A)$8. B)$12. C)$45. D)$70.

Use the following to answer questions 94-95: -(Table: Marginal Analysis of Sweatshirt Production II)Use Table: Marginal Analysis of Sweatshirt Production II.The profit at the optimal quantity of sweatshirts is: A)$15. B)$16. C)$48. D)$80.

Use the following to answer questions 94-95: -To determine the quantity of any activity that will maximize total profit,economists employ the: A)average decision rule. B)total decision rule. C)principle of marginal analysis. D)principle of average analysis.

Use the following to answer questions 94-95: -The activities of consumers and firms: A)have benefits but not costs. B)have costs but not benefits. C)have both costs and benefits. D)are too complex to be analyzed with economic theory.

Use the following to answer questions 98-102: -(Table: Marginal and Total Benefit)Use Table: Marginal and Total Benefit.Sid is deciding how many football games he wants to attend this year.If tickets to each football game cost $10,then he should attend _____ game(s). A)0 B)1 C)2 D)5

Use the following to answer questions 98-102: -(Table: Marginal and Total Benefit)Use Table: Marginal and Total Benefit.Sid is deciding how many football games he wants to attend this year.If tickets to each football game cost $75,how many games should he attend? A)0 B)1 C)2 D)5

Use the following to answer questions 98-102: -(Table: Marginal and Total Benefit)Use Table: Marginal and Total Benefit.Sid is deciding how many football games he wants to attend this year.If the games are free,how many games should he attend? A)1 B)5 C)7 D)8

Use the following to answer questions 98-102: -(Table: Marginal and Total Benefit)Use Table: Marginal and Total Benefit.Sid is deciding how many football games he wants to attend this year.Suppose football tickets cost $10,but suppose,too,that the star player just got injured and will be out for the season.As a result of the injury,Sid's total benefit of attending any game is now only 10% of the value shown in the table.In this case,how many games should he attend? A)0 B)1 C)2 D)6

Use the following to answer questions 103-106: -(Figure: The Optimal Quantity)Use Figure: The Optimal Quantity.If the marginal benefit of lawn mowing increased,the marginal _____ curve in the figure would shift to the _____ and the optimal quantity would be _____ than five lawns mowed. A)benefit;right;more B)cost;right;fewer C)benefit;left;fewer D)cost;left;more

Use the following to answer questions 103-106: -(Figure: The Optimal Quantity)Use Figure: The Optimal Quantity.If the marginal benefit of lawn mowing decreased,the marginal _____ curve in the figure would shift to the _____ and the optimal quantity would be _____ than five lawns mowed. A)benefit;right;more B)cost;right;fewer C)benefit;left;fewer D)cost;left;more

Use the following to answer questions 103-106: -(Figure: The Optimal Quantity)Use Figure: The Optimal Quantity.If the cost of lawn mowing decreased for all quantities of lawns mowed,the marginal _____ curve in the figure would shift to the _____ and the total profit would _____. A)benefit;right;increase B)cost;right;increase C)benefit;left;decrease D)cost;left;decrease

Use the following to answer questions 103-106: -(Figure: The Optimal Quantity)Use Figure: The Optimal Quantity.If the cost of lawn mowing increased for all quantities of lawns mowed,the marginal _____ curve in the figure would shift to the _____ and the total profit would _____. A)benefit;right;increase B)cost;right;increase C)benefit;left;decrease D)cost;left;decrease

Use the following to answer questions 107-110: -(Figure: Marginal Benefits and Marginal Costs)Use Figure: Marginal Benefits and Marginal Costs.More time spent studying economics adds points to economics scores (MB)but subtracts points from accounting scores (MC).When Claudia studies economics for four hours,the marginal benefit is _____ points;when she studies for 6 hours,the marginal benefit is _____ points. A)20;10 B)30;10 C)20;0 D)20;30

Use the following to answer questions 107-110: -(Figure: Marginal Benefits and Marginal Costs)Use Figure: Marginal Benefits and Marginal Costs.More time spent studying economics adds points to economics scores (MB)but subtracts points from accounting scores (MC).The marginal benefit of studying economics for two hours is _____ points,and the marginal cost is _____ points. A)40;0 B)30;10 C)20;20 D)10;30

Use the following to answer questions 107-110: -(Figure: Marginal Benefits and Marginal Costs)Use Figure: Marginal Benefits and Marginal Costs.More time spent studying economics adds points to economics scores (MB)but subtracts points from accounting scores (MC).The marginal benefit of studying economics for 4 hours is _____ points,and the marginal cost is _____ points. A)30;30 B)20;10 C)20;20 D)30;10

Use the following to answer questions 107-110: -(Figure: Marginal Benefits and Marginal Costs)Use Figure: Marginal Benefits and Marginal Costs.More time spent studying economics adds points to economics scores (MB)but subtracts points from accounting scores (MC).At 4 hours of study,Claudia will maximize her benefit from study time because: A)MB > MC. B)MB = 20 and MC = 5. C)the difference between total benefits and total costs is maximized. D)sunk costs are minimized.

Use the following to answer questions 111-115: -(Table: Expected Exam Scores from Studying Economics and Accounting)Use Table: Expected Exam Scores from Studying Economics and Accounting.If you studied for a total of 3 hours,your combined scores would be maximized by spending _____ hours studying economics. A)1 B)2 C)3 D)4

Use the following to answer questions 111-115: -(Table: Expected Exam Scores from Studying Economics and Accounting)Use Table: Expected Exam Scores from Studying Economics and Accounting.If you studied for a total of 3 hours,your combined scores would be maximized by spending _____ hours studying accounting. A)0 B)1 C)2 D)3

Use the following to answer questions 111-115: -(Table: Expected Exam Scores from Studying Economics and Accounting)Use Table: Expected Exam Scores from Studying Economics and Accounting.If you studied for a total of 3 hours and divided your time to maximize your combined scores,you would expect your combined scores to be _____ points. A)145 B)150 C)155 D)165

Use the following to answer questions 111-115: -(Table: Expected Exam Scores from Studying Economics and Accounting)Use Table: Expected Exam Scores from Studying Economics and Accounting.The opportunity (or marginal)cost in terms of your accounting score of spending the first hour studying economics is _____ points. A)0 B)5 C)10 D)15

Use the following to answer questions 111-115: -(Table: Expected Exam Scores from Studying Economics and Accounting)Use Table: Expected Exam Scores from Studying Economics and Accounting.The marginal benefit in terms of your economics score of spending the first hour studying economics is _____ points. A)5 B)10 C)15 D)20

Use the following to answer questions 116-120: -(Table: Tutoring)Use Table: Tutoring.Sigmund faces: A)increasing marginal benefit. B)decreasing marginal benefit. C)increasing marginal cost. D)constant marginal cost.

Use the following to answer questions 116-120: -(Table: Tutoring)Use Table: Tutoring.If the college requires all tutors to register with the dean and charges each tutor $10 to register and if Sigmund can charge all students their willingness to pay,his total profit from tutoring will be: A)$10. B)$20. C)$30. D)$40.

Use the following to answer questions 116-120: -(Table: The Cost of Producing Gadgets)Use Table: The Cost of Producing Gadgets.According to this table,the marginal cost is: A)increasing at a constant rate equal to $5. B)increasing at an increasing rate. C)increasing at a decreasing rate. D)constant and equal to $5.

Use the following to answer questions 116-120: -(Table: The Benefit of Producing Gadgets)Use Table: The Benefit of Producing Gadgets.The marginal benefit of consuming gadgets is: A)constant and equal to $5. B)decreasing at a constant rate of $5. C)decreasing.. D)increasing at a decreasing rate.

Use the following to answer questions 116-120: -(Table: The Cost and Benefit of Producing Gadgets)Use Table: The Cost and Benefit of Producing Gadgets.How many gadgets should you produce? A)2 B)3 C)4 D)5

Use the following to answer questions 124-125: -(Figure: The Marginal Analysis of Cell Phones)Use Figure: The Marginal Analysis of Cell Phones.You are considering purchasing cell phones.How many cell phones will you consume? A)1 B)2 C)3 D)4

Use the following to answer questions 124-125: -(Figure: The Marginal Analysis of Cell Phones)Use Figure: The Marginal Analysis of Cell Phones.You are considering purchasing cell phones for your department.If you buy the fifth cell phone,your change in total profit will be equal to: A)$0. B)-$2. C)$2. D)$4.

You have rented your first apartment,signing a lease that commits you to pay $500 each month for 12 months.You have an opportunity to take a trip to Europe during the entire month of June,and you will spend $2,000 traveling.Your apartment will be vacant,but because of your lease,you must still pay the rent.The cost of taking the trip to Europe is: A)$2,000 because the $500 for your June rent is a sunk cost. B)$2,500 because this is your total spending during the month of June. C)$1,500 because the June rent is an opportunity cost of traveling that must be deducted from the explicit cost of the trip. D)$2,500 because the June rent is an opportunity cost of traveling and must be added to the explicit cost of the trip.

Denaro pays $8,000 per month in rent to operate a health club in Memphis.He also pays $17,000 per month in wages,$3,000 per month in food and supplies,and $1,000 per month in insurance.All of his costs of production,except his insurance and rent,can change if he makes different decisions about his health club production.Denaro's monthly sunk costs equal: A)$20,000. B)$11,000. C)$29,000. D)$9,000.

You plan to attend a movie on Saturday night.You buy a ticket for $7 and then lose it.According to marginal analysis,you should: A)go home. B)buy another ticket and attend the movie. C)buy another ticket and attend the movie only if your marginal benefit of seeing the movie is more than $14. D)look for the lost ticket.

Sunk costs: A)affect economic profit. B)are the losses associated with failed business ventures. C)are an important component of marginal analysis. D)are the same as marginal costs.

Ian is such a big Braves fan that his benefit of seeing a Braves game is $200.He pays $100 for a ticket to see one of their playoff games.Unfortunately,he left the ticket in his jeans when he laundered them and the ticket was destroyed.According to marginal analysis,Ian should: A)not go to the game. B)buy another ticket for $100 and attend the game. C)buy another ticket and attend the game only if he can buy the ticket for less than $100. D)watch the game on TV.

One of Jessuina's New Year's resolutions was to exercise more,so she bought an annual membership to the gym that allows unlimited visits.Unfortunately,the gym is so crowded and noisy that Jessuina leaves every day with a headache,without working out at all.According to marginal analysis,Jessuina should: A)continue using the gym for the year,since she has already paid for the membership. B)join another gym only if a membership is cheaper at the new gym. C)join another gym only if she can get a refund on her current membership. D)stop using the gym.

Sunk costs: A)are not considered in marginal analysis. B)help to determine the optimal quantity of an activity. C)can dramatically increase marginal costs. D)are the same as variable costs.

After three years at an expensive college,Pierre realizes that he doesn't want to finish school but really wants to be a chef.When Pierre suggests that he leave college for culinary school,his parents insist that he stay for one more year to get his degree.Which statement is TRUE? A)Pierre's parents are correct: if he leaves college,it is as though he has wasted three years of tuition. B)Pierre's parents are wrong: the marginal benefit to Pierre of another year of college is less than the marginal cost of college. C)Pierre's parents are wrong: the marginal benefit to Pierre of another year of college is greater than the marginal cost of college. D)It is impossible to tell who is correct.

Economists' and psychologists' attempts to understand and explain why people make decisions that appear to be irrational is the field of study called _____ economics A)international B)irrational C)rational D)behavioral

The purpose of behavioral economics is to determine why: A)people maximize utility. B)firms maximize profit and minimize costs. C)people make decisions that appear to be irrational. D)markets usually behave in an efficient manner.

When a decision maker chooses the option leading to the outcome that he or she most prefers,he or she has made a _____ decision. A)irrational B)rational C)profit-maximizing D)loss-minimizing

A rational economic decision: A)must always result in the largest economic payoff. B)usually results in the smallest economic payoff. C)may or may not result in the largest economic payoff. D)is concerned with efficiency but not with equity or fairness.

The decision to tip a server is a(n): A)rational decision if the person leaving the tip is concerned about fairness. B)irrational economic decision because it reduces the economic payoff of the tipper. C)example of decision making using bounded rationality. D)example of behavior based on risk aversion.

The decision to give a birthday present to a friend is: A)decision making using bounded rationality. B)behavior based on risk aversion. C)a rational decision if the person giving the gift is concerned about the recipient's welfare. D)an irrational economic decision because it reduces the economic payoff of the person giving the gift.

When a person makes a choice that is close to but not exactly the one that leads to the best possible economic outcome,he or she is: A)making an irrational decision. B)usually ignoring opportunity costs. C)being overconfident. D)operating with bounded rationality.

When a person makes a quick decision without taking the time to compare the opportunity cost of all possible options,he or she is using: A)bounded rationality. B)risk aversion. C)loss aversion. D)the status quo.

The "good enough" method of decision making is also called: A)utility-maximizing behavior. B)profit-maximizing behavior. C)bounded rationality. D)irrational decision making.

Suppose Joan buys a new refrigerator to replace her old one that suddenly quit working.If Joan buys the model on closeout sale and doesn't take time to do research on repair records and energy efficiency of various other models,she is using: A)status quo decision making. B)bounded rationality. C)marginal analysis. D)risk aversion.

Which statement is an example of bounded rationality? A)Ann proofreads her term paper six times. B)Mary feels that she has studied enough to make an A+ on her economics exam but studies another two hours just to be sure. C)Tim studies only an hour on the morning of his economics exam because he is satisfied just to make a passing grade. D)Terry does his economics homework twice to be sure that he has a thorough understanding of the topic.

The willingness to sacrifice some economic payoff to avoid a potential loss is: A)irrational behavior. B)bounded rationality. C)the result of a concern about fairness. D)risk aversion.

A person who is risk averse: A)always makes irrational decisions. B)always makes rational decisions. C)is willing to pay to avoid economic loss. D)enjoys taking risks.

People are willing to buy insurance because of: A)risk aversion. B)the status quo. C)the miscalculation of opportunity costs. D)bounded rationality.

If a decision maker chooses an option that leaves him or her worse off than choosing another available option,he or she is: A)using bounded rationality. B)basing the decision on risk aversion. C)making an irrational decision. D)making a rational decision.

A decision maker who is irrational: A)chooses an option that makes him or her worse off,rather than choosing another available option. B)chooses the option that makes him or her better off,rather than choosing another available option. C)allocates income to maximize his or her satisfaction from consuming goods and services. D)seeks to maximize business profit.

The habit of mentally assigning dollars to different accounts so that some dollars are worth more than others is: A)status quo bias. B)bounded rationality. C)loss aversion. D)mental accounting.

If a person engages in mental accounting,he or she: A)is unwilling to recognize a loss and move on. B)values some dollars more than others. C)tends to avoid making decisions. D)tries to balance his or her bank account mentally,without writing anything down.

A person who is oversensitive to loss and is unwilling to recognize the loss and move on has: A)loss aversion. B)risk aversion. C)status quo bias. D)mental accounting.

A person with loss aversion: A)has a hard time recognizing losing investments and moving on. B)is likely to maximize total revenue rather than profit. C)is unlikely to ignore sunk costs. D)is more likely to use a credit card than to pay cash.

The tendency to avoid making a decision is: A)status quo bias. B)bounded rationality. C)loss aversion. D)mental accounting.

Which type of behavior is a systematic mistake that leads to irrational decisions? A)risk aversion B)bounded rationality C)maximizing profit rather than minimizing costs D)overconfidence

Which type of behavior is NOT a common mistake that leads to irrational decisions? A)mental accounting B)loss aversion C)risk aversion D)misperceptions about opportunity costs

Joshua is tired of school as well as his part-time job and decides on the spur of the moment to take a weekend trip to Cabo San Lucas.He pays for it with his credit card,rather than with money from his checking account.Which type of irrational behavior does this BEST represent? A)status quo bias B)mental accounting C)loss aversion D)risk aversion

Sally must submit a form to enroll in her company's flexible medical benefits program.Although she has been employed over a year,she has yet to complete the form.Which type of irrational behavior does this represent? A)status quo bias B)mental accounting C)loss aversion D)risk aversion

If a star college quarterback turns down a multimillion-dollar offer from the NFL to return for his senior year of college,he may be exhibiting: A)status quo bias. B)mental accounting. C)misperception of opportunity costs. D)risk aversion.

Mary goes ahead and buys a new car because she expects to receive a 10% increase in her salary next year.What type of behavior does this BEST represent? A)status quo bias B)overconfidence C)misperception of opportunity costs D)risk aversion

Cindy just graduated from college and started working at a large accounting firm.Although the firm will match her contributions to a retirement account,Cindy wants to wait several years before participating since there are so many things she needs to buy right now.What type of behavior does this represent? A)unrealistic expectations about the future B)loss aversion C)mental accounting D)risk aversion

Lucy bought some stock 10 years ago that has been priced at half of her purchase price for the past 5 years.However,Lucy refuses to sell the stock,thinking that,if she waits long enough,she will recover her investment.What type of behavior does this represent? A)mental accounting B)bounded rationality C)risk aversion D)loss aversion

Most economic models: A)assume that people behave irrationally. B)assume that people behave rationally. C)assume that people are reluctant to learn from their mistakes. D)are useless because they use too many simplifying assumptions.

Because resources are scarce,the true cost of anything is its opportunity cost.

Star athletes,singers,and actors often start their career very young,forgoing a college education.This is an example of poor decision making since a college education provides benefits that will be invaluable later in their lives.

When making decisions,a person should consider only costs that actually involve an explicit money outlay.This is because such costs actually have to be paid,whereas implicit costs are only notional or hypothetical.

Part of the explicit cost of owning a restaurant is rent paid for the kitchen equipment.

It is not possible to earn an economic profit without also earning an accounting profit.

Economic profits can be negative,even if accounting profits are positive.

Accounting profit takes into account explicit costs,but economic profit does not.

An "either-or" decision is a choice between two activities.

Marginal analysis should be used in "either-or" decisions.

In cities,a mile of road lane may cost $30 million or more,while in rural areas a mile of road lane may cost only $5 million.This means there should be more road lanes in rural areas than in urban areas.

If the marginal cost of any activity is constant at $4,then at the optimal quantity of the activity,the marginal benefit will be $4.

Anytime the marginal benefit of an activity is greater than zero,more activity should be undertaken.

The government should spend whatever amount is necessary to save a life.

Since they have already paid for their tickets,it does not make economic sense for fans to leave before a game is finished.

A sunk cost should be ignored in decisions about future actions.

Sara spends $25 for an all-day ticket to an amusement park.After one ride,it begins to rain and she wishes she had never come.Since she has already paid for her ticket,she should stay at the amusement park until it closes or she has wasted her $25.

Economic profits are calculated by: A)taking the difference between total revenue and the sum of explicit and implicit costs. B)taking the difference between total revenue and explicit costs only. C)taking the difference between the total revenue and implicit costs only. D)summing total revenue,explicit costs,and implicit costs.

(Scenario: Betty's Cookie Shop)Use Scenario: Betty's Cookie Shop.Given the information provided,Betty's implicit costs are: Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each.She employs five people,each of whom worked a total of 500 hours last year;she paid them $10 per hour.Her costs of equipment and raw materials add up to $75,000.Her business ability is legendary,and other companies have offered to pay Betty $100,000 to come to work for them.She also knows she could sell her cookie shop for $150,000.The bank in town pays an annual interest rate of 3% on all funds deposited with it. A)her salary if she worked elsewhere and interest she forgoes by not selling her shop and putting the money in the bank. B)the cost of labor,equipment,and raw materials. C)the revenue she receives from selling her cookies plus the cost of labor,equipment,and raw materials. D)revenue she receives from selling her cookies and her labor costs.

(Scenario: Betty's Cookie Shop)Use Scenario: Betty's Cookie Shop.Betty's explicit costs are equal to: Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each.She employs five people,each of whom worked a total of 500 hours last year;she paid them $10 per hour.Her costs of equipment and raw materials add up to $75,000.Her business ability is legendary,and other companies have offered to pay Betty $100,000 to come to work for them.She also knows she could sell her cookie shop for $150,000.The bank in town pays an annual interest rate of 3% on all funds deposited with it. A)$100,000. B)$80,000. C)$250,000. D)$264,000.

(Scenario: Betty's Cookie Shop)Use Scenario: Betty's Cookie Shop.Betty's implicit and explicit costs are equal to: Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each.She employs five people,each of whom worked a total of 500 hours last year;she paid them $10 per hour.Her costs of equipment and raw materials add up to $75,000.Her business ability is legendary,and other companies have offered to pay Betty $100,000 to come to work for them.She also knows she could sell her cookie shop for $150,000.The bank in town pays an annual interest rate of 3% on all funds deposited with it. A)$80,000. B)$184,500. C)$204,500. D)$100,000.

(Scenario: Betty's Cookie Shop)Use Scenario: Betty's Cookie Shop.Betty is trying to decide at what point she should stop selling cookies,and she knows she cannot change the price of a cookie.She should stop selling cookies if her: Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each.She employs five people,each of whom worked a total of 500 hours last year;she paid them $10 per hour.Her costs of equipment and raw materials add up to $75,000.Her business ability is legendary,and other companies have offered to pay Betty $100,000 to come to work for them.She also knows she could sell her cookie shop for $150,000.The bank in town pays an annual interest rate of 3% on all funds deposited with it. A)economic profit is positive. B)explicit and implicit costs are less than her revenues. C)implicit costs are greater than her accounting profits. D)economic profit is equal to her accounting profit.

If the marginal cost curve is upward sloping,as output increases,marginal costs will: A)increase. B)decrease. C)stay constant. D)become downward sloping.

If marginal costs remain constant,the marginal cost curve is: A)vertical. B)horizontal. C)upward sloping from the origin. D)downward sloping.

As George ate pizza during one recent outing,he found that he enjoyed each additional slice less and less.This implies that his marginal benefit was: A)decreasing. B)increasing. C)constant. D)vertical.

If marginal costs of production are greater than marginal benefits of production: A)costs will eventually decrease. B)too much of the good is being produced. C)more of the good should be produced. D)not all costs are being considered.

Firms will continue to produce if: A)the marginal benefits of producing an additional unit are greater than the marginal costs of producing that unit. B)the marginal benefits of producing an additional unit are less than the marginal costs of producing that unit. C)the marginal benefit of producing an additional unit is equal to the marginal cost of producing that unit. D)the costs of producing the unit stay constant.

Use the following to answer questions 198-200: -(Table: TC's Pizza Parlor)Use Table: TC's Pizza Parlor.Assume that marginal cost is constant in the intervals of production.The marginal cost for pizza production: A)remains constant. B)increases,then decreases. C)increases. D)decreases.

Use the following to answer questions 198-200: -(Table: TC's Pizza Parlor)Use Table: TC's Pizza Parlor.Assume that the marginal benefit is constant in intervals of production.Suppose five slices of pizza are being produced.What is the marginal benefit of producing one more slice of pizza? A)$3 B)$2 C)$15 D)$55

Use the following to answer questions 198-200: -(Table: TC's Pizza Parlor)Use Table: TC's Pizza Parlor.What is the optimal level of production? A)5 slices B)10 slices C)15 slices D)20 slices