Exam 9: Decision Making by Individuals and Firms

In making an "either-or" decision:

Use the following to answer questions : Marginal Benefit of Sweatshirts Quantity of shirts Total benefit 0 \ 0 1 16 2 31 3 45 4 58 5 70 -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the second sweatshirt is:

Feng is thinking of mowing lawns over the summer.His friend Jason mows lawns,and he says that 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:

In economic analysis,the principle of marginal analysis refers to:

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

Economists' and psychologists' attempts to understand and explain why people make decisions that appear to be irrational is the field of study called _____ economics.

Use the following to answer questions : 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,which paid $60 000 per year,and started Wang's Wicker Furniture Store.He rented a showroom for $20 000 for the year,purchased $60 000 in wicker furniture,and incurred costs of $40 000 for sales help and advertising.In his first year,his revenue was $150 000. -(Scenario: Accounting and Economic Profit)Use Scenario: Accounting and Economic Profit.The economic profit of Wang's Wicker Furniture Store is:

Tara notices that studying for 1 hour after class increases her economics grade by 11 points.The second hour yields a 7-point gain,the third hour yields a 4-point gain,and the fourth hour yields only a 1-point gain.This means that the marginal _____ of studying decreases with study hours.

Lucy bought some stock 10 years ago that has been priced at half of her purchase price for the past 5 years.However,Lucy refuses to sell the stock,thinking that if she waits long enough,she will recover her investment.What type of behaviour does this represent?

Use the following to answer questions : Marginal Benefit of Sweatshirts Quantity of shirts Total benefit 0 \ 0 1 16 2 31 3 45 4 58 5 70 -(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the fourth sweatshirt is:

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 1 employee $50 000 to manage the small office back home and pays $30 000 on rent and utilities for that office.His accountant tells him that if he sold all of the equipment,he could put that money in the bank and earn $3 000 in interest next year.Andreas also has received an offer to teach political science at a university at a salary of $100 000.Andreas's accounting profit is equal to _____,and his economic profit is equal to _____.

The amount by which an additional unit of an activity increases total benefit is:

Use the following to answer questions : Marginal Cost of Sweatshirts Quantity of shirts Total cost 0 \ 0 1 9 2 20 3 33 4 48 5 65 -(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the third sweatshirt is:

In economics,a marginal value refers to:

Because resources are scarce,the true cost of anything is its opportunity cost.

According to the profit-maximizing principle of marginal analysis,if the marginal benefit is _____ the marginal cost,_____.

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

The amount by which an additional unit of an activity increases total benefit is:

The "good enough" method of decision making is also called:

Use the following to answer question 125: Table: The Cost and Benefit of Producing Gadgets Quantity of Gadgets Total Cost Total Revenue 0 \ 100 \ 0 1 105 200 2 110 215 3 115 225 4 120 230 5 125 233 -(Table: The Cost and Benefit of Producing Gadgets)Use Table: The Cost and Benefit of Producing Gadgets.How many gadgets should you produce?