Question 1

The hidden-cost fallacy occurs when

Accepted Answer

A) A firm considers irrelevant costs 
B) A firm ignores relevant costs 
C) A firm considers overhead or depreciation costs to make short-run decisions 
D) Both a and c 
A) A firm considers irrelevant costs 
B) A firm ignores relevant costs 
C) A firm considers overhead or depreciation costs to make short-run decisions 
D) Both a and c

Question 2

You and two partners start a company.However,your partners play no role in running the company.You devote all our time and talent to run your own business rather than working for someone else.You incur an(a):

Accepted Answer

A) explicit cost. 
B) marginal cost. 
C) sunk cost 
D) opportunity cost. 
A) explicit cost. 
B) marginal cost. 
C) sunk cost 
D) opportunity cost.

Question 3

Opportunity cost of an activity

Accepted Answer

A) Is known to all parties 
B) Can not be measured in dollar terms 
C) May include both monetary costs and foregone incomes 
D) Is known with all certainty 
A) Is known to all parties 
B) Can not be measured in dollar terms 
C) May include both monetary costs and foregone incomes 
D) Is known with all certainty

Question 4

Shifting resources away from producing one good in order to produce another is an example of

Accepted Answer

A) Unlimited resources 
B) Limited wants 
C) Opportunity cost 
D) None of the above 
A) Unlimited resources 
B) Limited wants 
C) Opportunity cost 
D) None of the above

Question 5

After graduating from college,Jim had three choices,listed in order of preference:(1)Move to Florida from Philadelphia(2)work in a car dealership in Philadelphia,or(3)play soccer for a minor league in Philadelphia.His opportunity cost of moving to Florida includes

Accepted Answer

A) the benefits he could have received from playing soccer 
B) the income he could have earned at the car dealership 
C) both a and b 
D) cannot be determined from the given information 
A) the benefits he could have received from playing soccer 
B) the income he could have earned at the car dealership 
C) both a and b 
D) cannot be determined from the given information

Question 6

A business owner makes 1000 items a day.Each day he/she contributes 8 hours to produce those items.If hired,elsewhere he/she could have earned $250 an hour.The item sells for $15 each.Production does not stop during weekends.If the explicit costs total $150,000 for 30 days,the economic profit for the month equals:

Accepted Answer

A) $300,000 
B) $60,000 
C) $450,000 
D) $240,000 
A) $300,000 
B) $60,000 
C) $450,000 
D) $240,000

Question 7

A firm wishes to fire an employee.The company will save up to $3000 per month on his compensation package.It is estimated that the employee contributes around $4,100 to the company.The firm

Accepted Answer

A) Should not fire the employee because the benefits outweigh the costs 
B) Should fire the employee if the hidden cost of not firing him is $500 
C) Should fire the employee if the hidden cost of not firing him is $1500 
D) Need more information 
A) Should not fire the employee because the benefits outweigh the costs 
B) Should fire the employee if the hidden cost of not firing him is $500 
C) Should fire the employee if the hidden cost of not firing him is $1500 
D) Need more information

Question 8

The opportunity cost of an action:

Accepted Answer

A) is equal to the marginal cost of an action 
B) is equal to explicit cost 
C) is equal to the next best alternative forgone 
D) is the total cost of an action 
A) is equal to the marginal cost of an action 
B) is equal to explicit cost 
C) is equal to the next best alternative forgone 
D) is the total cost of an action

Question 9

James used $200,000 from his savings account that paid an annual interest of 10% to purchase a hardware store.After one year,James sold the business for 300,000.An Economist calculated his profit to be:

Accepted Answer

A) $300,000 
B) $100,000 
C) $80,000 
D) $20,000 
A) $300,000 
B) $100,000 
C) $80,000 
D) $20,000

Question 10

A business incurs the following costs per unit: Labor - $5/unit;Materials $3/unit and rent - $5000/month.If the firm produces 1000 units a month,the total fixed costs equals

Accepted Answer

A) $5,000 
B) $8,000 
C) $13,000 
D) $3,000 
A) $5,000 
B) $8,000 
C) $13,000 
D) $3,000

Question 11

The idea that having ownership of an item increases the value that a person puts on the item can be explained by

Accepted Answer

A) The endowment effect 
B) Loss aversion 
C) Overconfident bias 
D) Anchoring bias 
A) The endowment effect 
B) Loss aversion 
C) Overconfident bias 
D) Anchoring bias

Question 12

James used $250,000 from his savings account that paid an annual interest of 15% to purchase a hardware store.After one year,James sold the business for 320,000.His accountant calculated his profit to be:

Accepted Answer

A) $320,000 
B) $70,000 
C) $282,500 
D) $32,500 
A) $320,000 
B) $70,000 
C) $282,500 
D) $32,500

The hidden-cost fallacy occurs when

You and two partners start a company.However,your partners play no role in running the company.You devote all our time and talent to run your own business rather than working for someone else.You incur an(a):

Opportunity cost of an activity

Shifting resources away from producing one good in order to produce another is an example of

After graduating from college,Jim had three choices,listed in order of preference:(1)Move to Florida from Philadelphia(2)work in a car dealership in Philadelphia,or(3)play soccer for a minor league in Philadelphia.His opportunity cost of moving to Florida includes

A firm wishes to fire an employee.The company will save up to $3000 per month on his compensation package.It is estimated that the employee contributes around $4,100 to the company.The firm

The opportunity cost of an action:

James used $200,000 from his savings account that paid an annual interest of 10% to purchase a hardware store.After one year,James sold the business for 300,000.An Economist calculated his profit to be:

A business incurs the following costs per unit: Labor - $5/unit;Materials $3/unit and rent - $5000/month.If the firm produces 1000 units a month,the total fixed costs equals

The idea that having ownership of an item increases the value that a person puts on the item can be explained by

James used $250,000 from his savings account that paid an annual interest of 15% to purchase a hardware store.After one year,James sold the business for 320,000.His accountant calculated his profit to be:

The One Lessor of Business

Extent How Muchdecisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long-Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination Indirect Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters

Exam 3: Benefits, Costs, and Decisions

The hidden-cost fallacy occurs when

You and two partners start a company.However,your partners play no role in running the company.You devote all our time and talent to run your own business rather than working for someone else.You incur an(a):

Opportunity cost of an activity

Shifting resources away from producing one good in order to produce another is an example of

After graduating from college,Jim had three choices,listed in order of preference:(1)Move to Florida from Philadelphia(2)work in a car dealership in Philadelphia,or(3)play soccer for a minor league in Philadelphia.His opportunity cost of moving to Florida includes

A firm wishes to fire an employee.The company will save up to $3000 per month on his compensation package.It is estimated that the employee contributes around $4,100 to the company.The firm

The opportunity cost of an action:

James used $200,000 from his savings account that paid an annual interest of 10% to purchase a hardware store.After one year,James sold the business for 300,000.An Economist calculated his profit to be:

A business incurs the following costs per unit: Labor - $5/unit;Materials $3/unit and rent - $5000/month.If the firm produces 1000 units a month,the total fixed costs equals

The idea that having ownership of an item increases the value that a person puts on the item can be explained by

James used $250,000 from his savings account that paid an annual interest of 15% to purchase a hardware store.After one year,James sold the business for 320,000.His accountant calculated his profit to be:

The One Lessor of Business

Extent How Muchdecisions

Investment Decisions: Look Ahead and Reason Back

Simple Pricing

Economies of Scale and Scope

Understanding Markets and Industry Changes

Market Structure and Long-Run Equilibrium

Strategy: the Quest to Keep Profit From Eroding

Foreign Exchange, trade, and Bubbles

More Realistic and Complex Pricing

Direct Price Discrimination Indirect Price Discrimination

Strategic Games

Bargaining

Making Decisions With Uncertainty

Auctions

The Problem of Adverse Selection

The Problem of Moral Hazard

Getting Employees to Work in the Firms Best Interest

Getting Divisions to Work in the Firms Best Interest

Managing Vertical Relationships

Filters