Question 1

Most studies using the compensating differential approach have estimated the value of a life to be between $3 million and $7 million.

Accepted Answer

A) True 
 B)False

Question 2

The primary method that decision makers use to evaluate choices among competing alternatives is called

Accepted Answer

A)  the competitive forces model. 
B)  cost-benefit analysis. 
C)  heads-or-tails analysis. 
D)  absolute advantage. 
A)  the competitive forces model. 
B)  cost-benefit analysis. 
C)  heads-or-tails analysis. 
D)  absolute advantage.

Question 3

Claudia's Copy Shop is deciding which 3-D printer to purchase, and it only has room for one printer. It can purchase the "Mini-Me"small-object printer, which would generate benefits of $50,000 at a cost of $5,000, or it can purchase the "Gargantuan"large-object printer which would generate benefits of $250,000 at a cost of $25,000. Based on these numbers, Claudia's Copy Shop should purchase

Accepted Answer

A)  the "Mini-Me" printer. 
B)  the "Gargantuan" printer. 
C)  either printer, since the cost of each is exactly 10 percent of the benefit from each. 
D)  neither printer, since the cost of each is too high for a 3-D printer. 
A)  the "Mini-Me" printer. 
B)  the "Gargantuan" printer. 
C)  either printer, since the cost of each is exactly 10 percent of the benefit from each. 
D)  neither printer, since the cost of each is too high for a 3-D printer.

Question 4

A safety measure whose benefits outweigh its costs is called a ________.

Accepted Answer

cost-justi

Question 5

There are ________ between the risks individuals expose one another to and the risks corporations expose their customers to.

Accepted Answer

A)  major differences 
B)  no fundamental differences 
C)  only financial differences 
D)  significant, but relatively minor differences 
A)  major differences 
B)  no fundamental differences 
C)  only financial differences 
D)  significant, but relatively minor differences

Question 6

Arriving at a decision by comparing total costs and total benefits is called marginal analysis.

Accepted Answer

A) True 
 B)False

Question 7

A handgun manufacturer can make its handguns safer by adding a fingerprint recognition device to its products, so only the owner would be able to fire the gun. Adding the fingerprint recognition device costs $145 per handgun. The manufacturer estimates that this will prevent 150 injuries for every 100,000 handguns sold and that, on average, each injury causes $120,000 of harm. The injury cost per handgun is

Accepted Answer

A)  $145. 
B)  $180.00. 
C)  $460. 
D)  $800. 
A)  $145. 
B)  $180.00. 
C)  $460. 
D)  $800.

Question 8

The extra pay people earn in exchange for undertaking risky or otherwise undesirable work is called

Accepted Answer

A)  a compensating differential. 
B)  arbitrage income. 
C)  overtime pay. 
D)  a fringe benefit. 
A)  a compensating differential. 
B)  arbitrage income. 
C)  overtime pay. 
D)  a fringe benefit.

Question 9

________ should be considered when conducting a cost-benefit analysis.

Accepted Answer

A)  Total costs and total benefits 
B)  Only marginal costs and marginal benefits 
C)  Only implicit costs and implicit benefits 
D)  All costs and all benefits 
A)  Total costs and total benefits 
B)  Only marginal costs and marginal benefits 
C)  Only implicit costs and implicit benefits 
D)  All costs and all benefits

Question 10

The additional costs you expect to incur if you undertake an activity and the additional benefits you expect to receive if you undertake an activity are called ________ costs and benefits

Accepted Answer

The answer of The additional costs you expect to incur...

Question 11

The Eyes Wide Open Company is considering producing binoculars that can be used to directly view the sun during a solar eclipse, but it knows that some customers could potentially go blind when using the product. The Eyes Wide Open Company

Accepted Answer

A)  should definitely not produce these binoculars. 
B)  has no way to include the value of the potential damage to eyesight in its cost-benefit analysis. 
C)  has little choice but to include the value of the potential damage to eyesight in its cost-benefit analysis. 
D)  must redesign the binoculars so there is absolutely no possibility of damaged eyesight to customers. 
A)  should definitely not produce these binoculars. 
B)  has no way to include the value of the potential damage to eyesight in its cost-benefit analysis. 
C)  has little choice but to include the value of the potential damage to eyesight in its cost-benefit analysis. 
D)  must redesign the binoculars so there is absolutely no possibility of damaged eyesight to customers.

Question 12

A cost-justified precaution is a safety measure whose

Accepted Answer

A)  benefits outweigh its costs. 
B)  costs outweigh its benefits. 
C)  costs equal its benefits. 
D)  costs are zero. 
A)  benefits outweigh its costs. 
B)  costs outweigh its benefits. 
C)  costs equal its benefits. 
D)  costs are zero.

Question 13

With respect to the Ford Pinto, comparing the cost of the modification to the fuel tank with the lives the modification would save was the best way Ford could save the greatest number of lives at the lowest possible cost.

Accepted Answer

A) True 
 B)False

Question 14

In the case of the Ford Pinto, Ford decided that

Accepted Answer

A)  it would be cheaper to pay damages to families involved in crashes than to fix the problems with the Pinto. 
B)  it would be more expensive to pay damages to families involved in crashes than to fix the problems with the Pinto. 
C)  the problems with the Pinto could not be easily or cheaply fixed. 
D)  it would not be held liable for damages caused by the Pinto and therefore had no reason to fix them. 
A)  it would be cheaper to pay damages to families involved in crashes than to fix the problems with the Pinto. 
B)  it would be more expensive to pay damages to families involved in crashes than to fix the problems with the Pinto. 
C)  the problems with the Pinto could not be easily or cheaply fixed. 
D)  it would not be held liable for damages caused by the Pinto and therefore had no reason to fix them.

Question 15

Uni-Go Company makes motorized unicycles. Uni-Go is deciding whether to include a safety feature that would cost $6 for each unicycle. Uni-Go estimates the probability of death without the safety feature is 1/90,000 and the death cost per unicycle is $5.55. If Uni-Go has underestimated the probability of death and the true probability of death is 1/80,000, then the true cost-benefit recommendation would be for Uni-Go to

Accepted Answer

A)  add the safety device. 
B)  add the safety device and all other safety devices available. 
C)  not add the safety device. 
D)  not add the safety device nor any other safety devices. 
A)  add the safety device. 
B)  add the safety device and all other safety devices available. 
C)  not add the safety device. 
D)  not add the safety device nor any other safety devices.

Question 16

Estimating the value of an injured or deceased person's life by calculating what he or she would have earned over the remainder of his or her life is called the

Accepted Answer

A)  compensating differential approach. 
B)  death-and-taxes approach. 
C)  lost-income approach. 
D)  earnings-bracket approach. 
A)  compensating differential approach. 
B)  death-and-taxes approach. 
C)  lost-income approach. 
D)  earnings-bracket approach.

Question 17

Attempting to answer the question of how much a life is worth is a job undertaken by

Accepted Answer

A)  macroeconomists. 
B)  forensic economists. 
C)  economic theorists. 
D)  environmental economists. 
A)  macroeconomists. 
B)  forensic economists. 
C)  economic theorists. 
D)  environmental economists.

Question 18

After researching the effectiveness of child safety seats in reducing the accident death rate of children ages one to four, economist Steven Levitt found that

Accepted Answer

A)  for children under age four, safety seats are safer than any alternative. 
B)  for children under age two, safety seats are safer than any alternative, but beyond age two, they provide no appreciable benefit over standard car seat belts. 
C)  safety seats are actually more dangerous than standard car seat belts for children of any age. 
D)  safety seats provide no appreciable benefit over standard car seat belts for children of any age. 
A)  for children under age four, safety seats are safer than any alternative. 
B)  for children under age two, safety seats are safer than any alternative, but beyond age two, they provide no appreciable benefit over standard car seat belts. 
C)  safety seats are actually more dangerous than standard car seat belts for children of any age. 
D)  safety seats provide no appreciable benefit over standard car seat belts for children of any age.

Question 19

When it comes to unlikely but potentially deadly events, individuals

Accepted Answer

A)  are very good at estimating risks. 
B)  are not very good at estimating risks. 
C)  are better than large corporations at estimating risks. 
D)  do not even attempt to estimate risks. 
A)  are very good at estimating risks. 
B)  are not very good at estimating risks. 
C)  are better than large corporations at estimating risks. 
D)  do not even attempt to estimate risks.

Question 20

Marginal cost refers to the ________ cost incurred when choosing a particular action.

Accepted Answer

A)  total 
B)  net 
C)  implicit 
D)  additional 
A)  total 
B)  net 
C)  implicit 
D)  additional

Most studies using the compensating differential approach have estimated the value of a life to be between $3 million and $7 million.

The primary method that decision makers use to evaluate choices among competing alternatives is called

A safety measure whose benefits outweigh its costs is called a ________.

There are ________ between the risks individuals expose one another to and the risks corporations expose their customers to.

Arriving at a decision by comparing total costs and total benefits is called marginal analysis.

The extra pay people earn in exchange for undertaking risky or otherwise undesirable work is called

________ should be considered when conducting a cost-benefit analysis.

The additional costs you expect to incur if you undertake an activity and the additional benefits you expect to receive if you undertake an activity are called ________ costs and benefits

The Eyes Wide Open Company is considering producing binoculars that can be used to directly view the sun during a solar eclipse, but it knows that some customers could potentially go blind when using the product. The Eyes Wide Open Company

A cost-justified precaution is a safety measure whose

With respect to the Ford Pinto, comparing the cost of the modification to the fuel tank with the lives the modification would save was the best way Ford could save the greatest number of lives at the lowest possible cost.

In the case of the Ford Pinto, Ford decided that

Estimating the value of an injured or deceased person's life by calculating what he or she would have earned over the remainder of his or her life is called the

Attempting to answer the question of how much a life is worth is a job undertaken by

After researching the effectiveness of child safety seats in reducing the accident death rate of children ages one to four, economist Steven Levitt found that

When it comes to unlikely but potentially deadly events, individuals

Marginal cost refers to the ________ cost incurred when choosing a particular action.

Fundamental Concepts in Economics

Basic Game Theory: Games Between Two Players

Game Theory: Games Between Three or More Players

Free Exchange: Individual and International Trade

The Market System: Functions, Structure, and Institutions

The Nature of Pollution Problems

Government Policies to Regulate Pollution

Resource Depletion and Sustainability

Public Goods and the Role of Government

Public Goods: Tackling Large Projects and Eminent Domain

The Volunteers Dilemma: a Collective Inaction Problem

Voting: You Cant Always Get What You Want

The Economics of Health Insurance and Health Care

Segregation and Discrimination

Gross Domestic Product and the Wealth of Nations: an Introduction to the Macroeconomy

Unemployment

An Introduction to Money, Banks, and the Financial System

The Federal Reserve: Monetary Policy, Economic Activity, and Inflation

The Federal Government: Taxes, Spending, and Fiscal Policy

Income Inequality and the Redistribution of Income

Filters

Exam 2: Cost-Benefit Analysis and the Value of a Life

Most studies using the compensating differential approach have estimated the value of a life to be between $3 million and $7 million.

The primary method that decision makers use to evaluate choices among competing alternatives is called

A safety measure whose benefits outweigh its costs is called a ________.

There are ________ between the risks individuals expose one another to and the risks corporations expose their customers to.

Arriving at a decision by comparing total costs and total benefits is called marginal analysis.

The extra pay people earn in exchange for undertaking risky or otherwise undesirable work is called

________ should be considered when conducting a cost-benefit analysis.

The additional costs you expect to incur if you undertake an activity and the additional benefits you expect to receive if you undertake an activity are called ________ costs and benefits

The Eyes Wide Open Company is considering producing binoculars that can be used to directly view the sun during a solar eclipse, but it knows that some customers could potentially go blind when using the product. The Eyes Wide Open Company

A cost-justified precaution is a safety measure whose

With respect to the Ford Pinto, comparing the cost of the modification to the fuel tank with the lives the modification would save was the best way Ford could save the greatest number of lives at the lowest possible cost.

In the case of the Ford Pinto, Ford decided that

Estimating the value of an injured or deceased person's life by calculating what he or she would have earned over the remainder of his or her life is called the

Attempting to answer the question of how much a life is worth is a job undertaken by

After researching the effectiveness of child safety seats in reducing the accident death rate of children ages one to four, economist Steven Levitt found that

When it comes to unlikely but potentially deadly events, individuals

Marginal cost refers to the ________ cost incurred when choosing a particular action.

Fundamental Concepts in Economics

Basic Game Theory: Games Between Two Players

Game Theory: Games Between Three or More Players

Free Exchange: Individual and International Trade

The Market System: Functions, Structure, and Institutions

The Nature of Pollution Problems

Government Policies to Regulate Pollution

Resource Depletion and Sustainability

Public Goods and the Role of Government

Public Goods: Tackling Large Projects and Eminent Domain

The Volunteers Dilemma: a Collective Inaction Problem

Voting: You Cant Always Get What You Want

The Economics of Health Insurance and Health Care

Segregation and Discrimination

Gross Domestic Product and the Wealth of Nations: an Introduction to the Macroeconomy

Unemployment

An Introduction to Money, Banks, and the Financial System

The Federal Reserve: Monetary Policy, Economic Activity, and Inflation

The Federal Government: Taxes, Spending, and Fiscal Policy

Income Inequality and the Redistribution of Income

Filters