Exam 9: Decision Making by Individuals and Firms

The purpose of behavioral economics is to determine why:

Jacquelyn is a student at a major state university.Which factor is NOT an explicit cost of her attending college?

The "good enough" method of decision making is also called:

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 _____.

(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.

If a decision maker chooses an option that leaves him or her worse off than choosing another available option,he or she is:

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.

Use the following to answer question: -(Table: Tutoring)Use Table: Tutoring.Sigmund faces:

(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.

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

A rational economic decision:

Economists' and psychologists' attempts to understand and explain why people make decisions that appear to be irrational is the field of study called _____ economics

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:

If at a given quantity _____,the decision maker should do _____ of the activity.

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

Use the following to answer question: -(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?

Economic profits are calculated by:

Whenever marginal benefit is less than marginal cost,the decision maker should do _____ of the activity.

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

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?