Exam 9: Decision Making by Individuals Firms

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:

Constant marginal costs occur when production of each individual unit costs:

To maximize her grade in economics, Stacey should study until:

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:

Accountants use only _____ costs in their computations of short-run total cost.

Sunk costs:

The implicit cost of capital is:

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

The willingness to sacrifice some economic payoff to avoid a potential loss is:

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

Marginal benefit:

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:

Use the following to answer questions: -(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. If you studied for a total of three hours and divided your time to maximize your combined scores, you would expect your combined scores to be _____ points.

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

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

For most firms, economic profit is:

Samantha is an artist who operates her studio and gallery in town. She produces watercolor paintings in the studio and sells them in the gallery. Give an example of an explicit and an implicit cost that Samantha is likely to incur.

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

Use the following to answer questions: 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. -(Scenario: Betty's Cookie Shop) Betty's implicit and explicit costs are equal to:

The decision to give a birthday present to a friend is: