Exam 10: Decision Making by Individuals and Firms

Use the following to answer questions -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of producing sweatshirts is an example of ______ marginal costs.

As George ate pizza during one recent outing, he found that he enjoyed each additional slice less and less. This implies that his marginal benefit was:

After earning your BA, you have to decide whether to take 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 to pay the remaining $22,000 per year, you would have to cash in savings bonds from your grandparents that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is:

An "either-or" decision entails:

The implicit cost of capital is:

George owns a dude ranch in Texas. He pays $32,000 per year in insurance, $408,000 in wages, and $23,000 in supplies. He forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic _____ equaled _____.

Feng is thinking of mowing lawns over the summer. His friend Jason mows lawns, and he says the marginal cost of mowing the fourth lawn in a day is $40. Feng thinks about it and realizes that the total cost of mowing four lawns is:

Marginal analysis is relevant for:

Some highways have one lane; others have two, three, or more. If each lane costs $10 million per mile, an economist assumes that the total benefit of a three-lane highway must be _____ million per mile.

Use the following to answer questions -(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fifth sweatshirt is:

Use the following to answer questions Figure: The Marginal Benefit Curve -(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. The total benefit of mowing seven lawns is approximately:

A "how much" decision is best made by comparing the _____ of an action to the _____ of that action.

Bessie wants to calculate the accounting and economic profits of her cattle farm in Nebraska. She pays $30,000 per year in overhead, $80,000 in wages, and $20,000 in insurance. She forgoes $30,000 per year that she could make as a teacher. If her total revenue equals $140,000, that means her accounting profit is _____ and her economic profit is _____.

Use the following to answer questions : -(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the fifth sweatshirt is:

Whenever marginal benefit is less than marginal cost, the decision maker should do _____ of the activity.

Use the following to answer questions Figure: The Marginal Cost Curve -(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. The approximate total cost of mowing seven lawns is:

Use the following to answer questions Scenario: Betty's Cookie Shop Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $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 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. -(Scenario: Betty's Cookie Shop) Betty is trying to decide at what point she should stop selling cookies, and she knows she cannot change the price of a cookie. She should stop selling cookies if:

If marginal costs remain constant, the marginal cost curve is:

Jacquelyn is a student at a major state university. Which of the following is NOT an explicit cost of her attending college?

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: