Exam 9: Decision Making by Individuals and Firms

When making decisions, it is important to consider only those costs that actually involve an explicit money outlay.This is because such costs actually have to be paid, whereas implicit costs are only notional or hypothetical.

Marginal benefit: A.is the subsidiary benefit from an activity; for example, the main benefit from weight training is an increase in muscle mass, and the subsidiary or marginal benefit might be a reduction in cholesterol. B.is the addition to total benefit due to undertaking one more unit of an activity. C.must be increasing if total benefit is increasing. D.normally increases as more of an activity is undertaken.

The is the amount by which an additional unit of an activity increases its total benefit. A.average benefit B.net benefit C.marginal benefit D.top benefit

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

Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year.If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled: A.$10,000. B.$50,000. C.$100,000. D.$200,000.

To determine the quantity of any activity that will maximize total net benefit, economists employ the ________ rule. A.average decision B.total decision C.principle of marginal analysis D.principle of average analysis

During its only year of operation, a firm collected $175,000 in revenue and spent $50,000 on raw materials, labor, and utilities.The owners of the firm spent $100,000 of their own money to build the firm's factory (instead of buying bonds and earning a 10% annual rate of return), which they sold at the end of the year for $100,000.The firm's economic profit is: A.$35,000. B.$125,000. C.$115,000. D.$25,000.

Economists' and psychologists' attempts to understand and explain why people make decisions that appear to be irrational is the field of study called: A.international economics. B.irrational economics. C.rational economics. D.behavioral economics.

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.The graph represents your marginal benefit and marginal cost curves.If you consume the fifth cell phone, your net change in total benefit will be equal to: A.$0. B.-$2. C.$2. D.$4.

Which of the following is an "either-or" decision? 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.

Costs that are included in the economic concept of cost but that are not explicit costs are: A.outlay costs. B.accounting profits. C.implicit costs. D.economic profits.

(Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor.Given the table, what is the optimal number of pizza slices that should be produced? A.5 B.10 C.15 D.20

Profit is the difference between ________ and _. A.total sales; total revenues B.total profits; total costs C.total revenues; total costs D.marginal costs; marginal revenues

When a decision maker makes a quick decision without taking the time to compare the opportunity cost of all possible options, he is using: A.bounded rationality. B.risk aversion. C.loss aversion. D.the status quo.

Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each.In order to run the business, she employs five people, each of whom worked a total of 500 hours last year; she paid them a wage of $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 if she would come to work for them.She also knows she could sell her cookie shop for $150,000.The bank in town currently pays an annual interest rate of 3% on all funds deposited with it.Assume there is no capital depreciation at this point. (Scenario: Betty's Cookie Shop) Given the information provided, Betty's explicit costs are equal to: A.$100,000. B.$80,000. C.$250,000. D.$264,000.

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 represent? A.status quo bias B.mental accounting C.loss aversion D.risk aversion

(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit.Sed is deciding how many football games he wants to attend this year.If tickets to each football game cost $10, then he should attend game(s). A.0 B.1 C.2 D.5

(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit.Sed is deciding how many football games he wants to attend this year.If tickets to each football game cost $75, how many games should he attend? A.0 B.1 C.2 D.5

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

Andreas is a political consultant with his own firm.He travels the country and provides campaign advice for political candidates.Last year he earned $250,000 in revenue for his services.He pays one employee $50,000 to manage the small office back home and pays $25,000 on rent and utilities for that office.Andreas owns computing and office equipment that depreciated by $5,000 last year.His accountant tells him that if he were to sell all of the equipment, he could put that money in the bank and earn $3,000 in interest next year.Bill also has received an offer to teach political science at a college at a salary of $100,000.Bill's accounting profit is equal to and his economic profit is equal to _. A.$175,000; $67,000 B.$170,000; $67,000 C.$200,000; $72,000 D.$170,000; $70,000