Exam 9: Decision Making by Individuals and Firms

Some restaurants offer an "all-you-can-eat" buffet.Diners pay a flat fee to get a plate, and then they can eat as much as they want without paying additional money.Use marginal analysis to explain why even the hungriest of diners will eventually stop eating.

An "either-or" decision involves A.deciding how much of an activity to do. B.a choice between two activities. C.calculating marginal costs for each activity. D.calculating the marginal benefits for each activity.

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts.The marginal cost of the third sweatshirt is: A.$33. B.$13. C.$11. D.$9.

You and a friend have each spent $8 on a movie ticket.Ten minutes into the movie, you both decide that the movie is horrible.Your friend says that you should stay and watch the rest of the movie because you "should get your money's worth." How do you respond?

Constant marginal costs occur when each individual unit costs A.less than the previous one to produce. B.more than the previous one to produce. C.the same to produce as the previous one. D.nothing to produce.

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

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

Figure: Marginal Benefits and Marginal Costs (Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs.As shown, more time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC).The marginal benefit of studying economics when Claudia studies for 2 hours is ________ points and the marginal cost is points. A.40; 0 B.30; 10 C.20; 20 D.10; 30

Figure: The Optimal Quantity (Figure: The Optimal Quantity) Look at the figure The Optimal Quantity.If the cost of producing lawn-mowing increased, the ________ curve in the figure would shift to the and the total net gain would _. A.marginal benefit; right; increase B.marginal cost; right; increase C.marginal benefit; left; decrease D.marginal cost; left; decrease

The amount by which an additional unit of an activity increases total benefit is: A.net benefit. B.marginal benefit. C.marginal cost. D.utility.

If the marginal benefit received from a good is equal to the marginal cost of production, then: A.society's well-being cannot be improved by changing production. B.society's well-being can be improved if production decreases. C.society's well-being can be improved if production increases. D.the market is producing too much of the good.

While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice.You then conclude: A.you will be better off if you eat one more slice. B.you will be no better off and no worse off from eating 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.

When a decision maker makes a choice that is close to but not exactly the one that leads to the best possible economic outcome, he or she is: A.making an irrational decision. B.usually ignoring opportunity costs. C.being overconfident. D.operating with bounded rationality.

Part of the associated with the Chicago Cubs baseball team is the value of batting cages. A.labor B.land C.capital D.entrepreneurship

Anytime the marginal benefit of an activity is greater than zero, more activity should be undertaken.

Figure: Marginal Benefits and Marginal Costs (Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs.As shown, more time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC).At 4 hours of study, Claudia will "maximize" her study time because: A.MB > MC. B.MB = 20 and MC = 5. C.the difference between total benefits and total costs is maximized. D.sunk costs are minimized.

Samantha quit her job teaching art at the high school and is now an artist who operates her studio and gallery in town.She produces watercolor paintings in the studio and sells them in the gallery.Last year at the high school she was paid a salary of $25,000.In the operation of her small business, she spent $30,000 on supplies, $15,000 on utilities, and $12,000 on rent, and her equipment depreciated by $3,000.How much revenue must Samantha receive so that she doesn't regret quitting her job as a high school art teacher?

Some highways have one lane; others have two, three, or more.If each lane costs $10 million per mile, an economist would assume that the total benefit of a three-lane highway must be: A.less than $10 million per mile. B.$10 to $20 million per mile. C.$20 to $30 million per mile. D.$30 million or more per mile.

The willingness to sacrifice some economic payoff in order to avoid a potential loss is: A.irrational behavior. B.bounded rationality. C.the result of a concern about fairness. D.risk aversion.

When a decision maker chooses the option leading to the outcome that he or she most prefers, he or she has made a decision. A.irrational B.rational C.profit-maximizing D.loss-minimizing