Exam 9: Decision Making by Individuals and Firms

In economic analysis, the optimal quantity of an activity is the quantity at which: A.marginal benefit exceeds marginal cost by the greatest amount. B.total benefit exceeds total cost by the greatest amount. C.marginal benefit equals marginal cost. D.total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost.

(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 3 hours, the marginal benefit in terms of your economics score of spending the first hour studying economics is points. A.5 B.10 C.15 D.20

If a star college quarterback turns down a multi-million-dollar offer from the NFL to return for his senior year of college, he may be exhibiting which of the following types of irrational behavior? A.status quo bias B.mental accounting C.misperception of opportunity costs D.risk aversion

Accountants use only costs in their computations of short-run total cost. A.Opportunity B.implicit C.explicit D.variable

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts.The marginal cost of the fifth sweatshirt is: A.$17. B.$15. C.$13. D.$11.

According to the optimal output rule, if the marginal benefit is: A.more than the marginal cost, an activity should be reduced. B.less than the marginal cost, an activity should be increased. C.equal to the marginal cost, net benefit is maximized. D.more than marginal cost, net benefit is maximized.

Which of the following is a "how much" decision? A.Mary is trying to decide whether to go to work or go to college after she graduates from high school next month. B.Andrea is trying to decide whether to go to graduate school in economics or go to law school. C.Tim is trying to decide the amount of money to save each month in order to buy a new car next year. D.Andy is trying to decide whether to take a prep course for the Law School Admissions Test.

After earning your BA, you have to decide whether to accept the offer of a job that will pay you $45,000 per year or spend an additional two years earning an MBA.If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000.You have been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, you would have to cash in savings bonds that your grandparents have given you that have been earning $500 in interest per year.The annual opportunity cost of earning your MBA is: A.$67,500. B.$77,000. C.$99,000. D.$77,500.

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: A.$15,000. B.$20,000. C.-$40,000. D.-$45,000.

On Saturday night you plan to attend a movie.You buy a ticket for $7 and then lose it.According to marginal analysis, you should: A.go home. B.buy another ticket and attend the movie. C.buy another ticket and attend the movie only if your marginal benefit of seeing the movie is more than $14. D.look for the lost ticket.

(Table: Marginal Analysis of Sweatshirt Production I) Given the information in the table, the optimal quantity of sweatshirts to produce is:

(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts.The marginal benefit of producing the second sweatshirt is: A.$31. B.$16. C.$15. D.$14.

You own a small deli that sells sandwiches, salads, and soup to the community.Which of the following is an implicit cost of the business? A.wages paid to part-time employees B.the job offer you did not accept at a local catering service C.bread, meat, and vegetables used to produce the items on your menu D.your monthly utility bill

Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, 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 , while the marginal benefit from the third slice must be less than _. A.$3.50; $4.50 B.$3.50; $1.00 C.$1.50; $1.00 D.$1.50; $4.50

(Table: Tutoring) Look at the table Tutoring.If the college requires all tutors to register with the dean and charges each tutor $10 to register, Sigmund's optimal number of tutoring hours will be:

The implicit cost of capital is: A.the explicit cost of capital that the firm might have used but didn't need to. B.depreciation. C.the opportunity cost of the capital used by a business. D.the cost of human capital.

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 that paid $60,000 per year and started Wang's Wicker Furniture Store.He rented a showroom for $15,000 for the year, purchased capital equipment that depreciates $5,000 each 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) What are the implicit costs of Wang's Wicker Furniture Store? A.$7,000 B.$60,000 C.$65,000 D.$69,000

The decision to tip a waiter or waitress is: A.a rational decision if the person leaving the tip is concerned about fairness. B.an irrational economic decision because it reduces the economic payoff of the tipper. C.an example of decision making using bounded rationality. D.an example of behavior based on risk aversion.

In making an "either-or" decision A.choose the activity that results in the greater economic profit. B.choose the activity that results in the greater accounting profit. C.continue in an activity as long as the marginal cost is greater than the marginal benefit. D.continue in an activity as long as the marginal cost is less than the marginal benefit.

You can buy slices of pizza at $2.50 each, and you have created a table that summarizes your total cost and total benefit of purchasing up to five slices of pizza.A coworker, looking over your shoulder, says that you should consume five slices of pizza because the total benefit you receive is greatest at that quantity.How do you respond? Is there any situation in which your coworker might be correct?