Question 1

If marginal costs of production are greater than marginal benefits of production:

Accepted Answer

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. 
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.

Question 2

Use the following to answer questions:
Figure: The Marginal Analysis of Cell Phones  
-(Figure: The Marginal Analysis of Cell Phones) Look at the 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:

Accepted Answer

A)  $0. 
B)  -$2. 
C)  $2. 
D)  $4. 
A)  $0. 
B)  -$2. 
C)  $2. 
D)  $4.

Question 3

Use the following to answer questions:  
-(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the third sweatshirt is:

Accepted Answer

A)  $33. 
B)  $13. 
C)  $11. 
D)  $9. 
A)  $33. 
B)  $13. 
C)  $11. 
D)  $9.

Question 4

Use the following to answer questions:
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. Instead of using the capital for his own business, he could rent it to a rival firm and earn $5,000 a year. In his first year, his revenue was $150,000.
-(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $10,000 
D)  $100,000 
A)  $0 
B)  $5,000 
C)  $10,000 
D)  $100,000

Question 5

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 6

Use the following to answer questions:  
-(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

Accepted Answer

A)  $9. 
B)  $20. 
C)  $11. 
D)  $29. 
A)  $9. 
B)  $20. 
C)  $11. 
D)  $29.

Question 7

Use the following to answer questions:
Figure: The Marginal Benefit Curve  
-(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. The total benefit of mowing four lawns is approximately:

Accepted Answer

A)  $25. 
B)  $35. 
C)  $80. 
D)  $114. 
A)  $25. 
B)  $35. 
C)  $80. 
D)  $114.

Question 8

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

Accepted Answer

A)  utility-maximizing behavior. 
B)  profit-maximizing behavior. 
C)  bounded rationality. 
D)  irrational decision making. 
A)  utility-maximizing behavior. 
B)  profit-maximizing behavior. 
C)  bounded rationality. 
D)  irrational decision making.

Question 9

Most economic models:

Accepted Answer

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. 
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.

Question 10

If marginal costs remain constant, the marginal cost curve is:

Accepted Answer

A)  vertical. 
B)  horizontal. 
C)  upward-sloping from the origin. 
D)  downward-sloping. 
A)  vertical. 
B)  horizontal. 
C)  upward-sloping from the origin. 
D)  downward-sloping.

Question 11

Joshua is tired of school and 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?

Accepted Answer

A)  status quo bias 
B)  mental accounting 
C)  loss aversion 
D)  risk aversion 
A)  status quo bias 
B)  mental accounting 
C)  loss aversion 
D)  risk aversion

Question 12

In general, when marginal benefit is greater than marginal cost, the decision maker should do _____ of the activity.

Accepted Answer

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

Question 13

The activities of consumers and firms:

Accepted Answer

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. 
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.

Question 14

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:

Accepted Answer

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. 
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.

Question 15

The costs economists use in the concept of economic profit are:

Accepted Answer

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). 
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).

Question 16

For which of the following decisions would marginal analysis be relevant?

Accepted Answer

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 
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

Question 17

Use the following to answer questions:  
-(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ______ marginal costs.

Accepted Answer

A)  decreasing 
B)  increasing 
C)  constant 
D)  random 
A)  decreasing 
B)  increasing 
C)  constant 
D)  random

Question 18

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:

Accepted Answer

A)  wash the tenth car. 
B)  not wash the tenth car. 
C)  increase his marginal benefit. 
D)  There is not enough information to decide. 
A)  wash the tenth car. 
B)  not wash the tenth car. 
C)  increase his marginal benefit. 
D)  There is not enough information to decide.

Question 19

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 _____.

Accepted Answer

A)  $3.50; $4.50 
B)  $3.50; $1.00 
C)  $1.50; $1.00 
D)  $1.50; $4.50 
A)  $3.50; $4.50 
B)  $3.50; $1.00 
C)  $1.50; $1.00 
D)  $1.50; $4.50

Question 20

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.

Accepted Answer

A) True 
 B)False

If marginal costs of production are greater than marginal benefits of production:

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the third sweatshirt is:

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

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

Use the following to answer questions: Figure: The Marginal Benefit Curve -(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. The total benefit of mowing four lawns is approximately:

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

Most economic models:

If marginal costs remain constant, the marginal cost curve is:

Joshua is tired of school and 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?

In general, when marginal benefit is greater than marginal cost, the decision maker should do _____ of the activity.

The activities of consumers and firms:

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:

The costs economists use in the concept of economic profit are:

For which of the following decisions would marginal analysis be relevant?

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ______ marginal costs.

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:

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 _.

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.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 9: Decision Making by Individuals Firms

If marginal costs of production are greater than marginal benefits of production:

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the third sweatshirt is:

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

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

Use the following to answer questions: Figure: The Marginal Benefit Curve -(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. The total benefit of mowing four lawns is approximately:

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

Most economic models:

If marginal costs remain constant, the marginal cost curve is:

Joshua is tired of school and 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?

In general, when marginal benefit is greater than marginal cost, the decision maker should do _____ of the activity.

The activities of consumers and firms:

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:

The costs economists use in the concept of economic profit are:

For which of the following decisions would marginal analysis be relevant?

Use the following to answer questions: -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ______ marginal costs.

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:

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 _____.

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.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

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 _.