Question 1

If a person engages in mental accounting,he or she:

Accepted Answer

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) 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.

Question 2

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.

Accepted Answer

A) cost 
B) benefit 
C) opportunity cost 
D) time 
A) cost 
B) benefit 
C) opportunity cost 
D) time

Question 3

Use the following to answer question:  
-(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.

Accepted Answer

A) 5 
B) 10 
C) 15 
D) 20 
A) 5 
B) 10 
C) 15 
D) 20

Question 4

The _____ is the amount by which an additional unit of activity increases its total cost.

Accepted Answer

A) marginal cost 
B) average cost 
C) average profit 
D) marginal benefit 
A) marginal cost 
B) average cost 
C) average profit 
D) marginal benefit

Question 5

The amount by which an additional unit of an activity increases total cost is:

Accepted Answer

A) net benefit. 
B) marginal benefit. 
C) negative benefit. 
D) marginal cost. 
A) net benefit. 
B) marginal benefit. 
C) negative benefit. 
D) marginal cost.

Question 6

Use the following to answer question:  
-(Table: The Cost and Benefit of Producing Gadgets)Use Table: The Cost and Benefit of Producing Gadgets.How many gadgets should you produce?

Accepted Answer

A) 2 
B) 3 
C) 4 
D) 5 
A) 2 
B) 3 
C) 4 
D) 5

Question 7

Marginal analysis is relevant for:

Accepted Answer

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) 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.

Question 8

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:

Accepted Answer

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. 
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.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which statement describes an "either-or" decision?

Accepted Answer

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. 
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.

Question 11

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____.

Accepted Answer

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 
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

Question 12

Use the following to answer question:  
-(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.

Accepted Answer

A) 0 
B) 5 
C) 10 
D) 15 
A) 0 
B) 5 
C) 10 
D) 15

Question 13

Sunk costs:

Accepted Answer

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. 
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.

Question 14

A "how much" decision is BEST made by comparing the _____ of an action to the _____ of that action.

Accepted Answer

A) explicit costs;implicit costs 
B) accounting profit;economic profit 
C) marginal benefits;marginal costs 
D) present value;net present value 
A) explicit costs;implicit costs 
B) accounting profit;economic profit 
C) marginal benefits;marginal costs 
D) present value;net present value

Question 15

Use the following to answer question:  
-(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 _____.

Accepted Answer

A) benefit;right;increase 
B) cost;right;increase 
C) benefit;left;decrease 
D) cost;left;decrease 
A) benefit;right;increase 
B) cost;right;increase 
C) benefit;left;decrease 
D) cost;left;decrease

Question 16

A person who is risk averse:

Accepted Answer

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

Question 17

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 the games are free,how many games should he attend?

Accepted Answer

A) 1 
B) 5 
C) 7 
D) 8 
A) 1 
B) 5 
C) 7 
D) 8

Question 18

Which statement describes a "how much" decision?

Accepted Answer

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. 
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.

Question 19

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

Accepted Answer

A) less 
B) that amount 
C) more 
D) none 
A) less 
B) that amount 
C) more 
D) none

Question 20

In economic analysis,at the optimal quantity of an activity:

Accepted Answer

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. 
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.

Exam 9: Decision Making by Individuals and Firms

If a person engages in mental accounting,he or she:

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.

Use the following to answer question: -(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.

The _____ is the amount by which an additional unit of activity increases its total cost.

The amount by which an additional unit of an activity increases total cost is:

Use the following to answer question: -(Table: The Cost and Benefit of Producing Gadgets)Use Table: The Cost and Benefit of Producing Gadgets.How many gadgets should you produce?

Marginal analysis is relevant for:

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 sunk cost should be ignored in decisions about future actions.

Which statement describes an "either-or" decision?

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____.

Sunk costs:

A "how much" decision is BEST made by comparing the _____ of an action to the _____ of that action.

Use the following to answer question: -(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 person who is risk averse:

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 the games are free,how many games should he attend?

Which statement describes a "how much" decision?

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

In economic analysis,at the optimal quantity of an activity:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _ the marginal cost,_.

A "how much" decision is BEST made by comparing the _ of an action to the _ of that action.

Use the following to answer question: -(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 ___.