Question 1

In general,when marginal benefit is greater than marginal cost,the decision maker should do _____ of the activity.

Accepted Answer

A)  less 
B)  that exact amount 
C)  more 
D)  none 
A)  less 
B)  that exact amount 
C)  more 
D)  none

Question 2

When a person makes a quick decision without taking the time to compare the opportunity cost of all possible options,he or she is using:

Accepted Answer

A)  bounded rationality. 
B)  risk aversion. 
C)  loss aversion. 
D)  the status quo. 
A)  bounded rationality. 
B)  risk aversion. 
C)  loss aversion. 
D)  the status quo.

Question 3

In economic analysis,at the optimal quantity of an activity:

Accepted Answer

A)  marginal benefit exceeds marginal cost by the greatest amount. 
B)  total benefit equals total cost. 
C)  marginal benefit equals total benefit. 
D)  total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost. 
A)  marginal benefit exceeds marginal cost by the greatest amount. 
B)  total benefit equals total cost. 
C)  marginal benefit equals total benefit. 
D)  total benefit exceeds total cost by the greatest amount and marginal benefit equals marginal cost.

Question 4

For MOST firms,economic profit is:

Accepted Answer

A)  less than accounting profit. 
B)  equal to accounting profit. 
C)  greater than accounting profit. 
D)  negative. 
A)  less than accounting profit. 
B)  equal to accounting profit. 
C)  greater than accounting profit. 
D)  negative.

Question 5

If a star university hockey player turns down a multimillion-dollar offer from the NHL to return for his last year of university,he may be exhibiting:

Accepted Answer

A)  status quo bias. 
B)  mental accounting. 
C)  misperception of opportunity costs. 
D)  risk aversion. 
A)  status quo bias. 
B)  mental accounting. 
C)  misperception of opportunity costs. 
D)  risk aversion.

Question 6

Suppose that the Toronto Blue Jays could rent out the Rogers Centre (the field they play on)to local youth leagues for $11 000 per month.The $11 000 per month is the _____ cost of capital.

Accepted Answer

A)  implicit 
B)  explicit 
C)  direct 
D)  total 
A)  implicit 
B)  explicit 
C)  direct 
D)  total

Question 7

The _____ benefit is the amount by which an additional unit of an activity increases its total benefit.

Accepted Answer

A)  average 
B)  net 
C)  marginal 
D)  top 
A)  average 
B)  net 
C)  marginal 
D)  top

Question 8

If a decision maker chooses an option that leaves him or her worse off than choosing another available option,he or she is:

Accepted Answer

A)  using bounded rationality. 
B)  basing the decision on risk aversion. 
C)  making an irrational decision. 
D)  making a rational decision. 
A)  using bounded rationality. 
B)  basing the decision on risk aversion. 
C)  making an irrational decision. 
D)  making a rational decision.

Question 9

Which type of behaviour is NOT a common mistake that leads to irrational decisions?

Accepted Answer

A)  mental accounting 
B)  loss aversion 
C)  risk aversion 
D)  misperceptions about opportunity costs 
A)  mental accounting 
B)  loss aversion 
C)  risk aversion 
D)  misperceptions about opportunity costs

Question 10

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:

Accepted Answer

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

Question 11

Accountants use only _____ costs in their computations of short-run total cost.

Accepted Answer

A)  opportunity 
B)  implicit 
C)  explicit 
D)  variable 
A)  opportunity 
B)  implicit 
C)  explicit 
D)  variable

Question 12

If the marginal benefit received from consuming a good is equal to the marginal cost of production:

Accepted Answer

A)  society's well-being cannot be improved by changing production. 
B)  society's well-being can be improved if production decreases. 
C)  society's well-being can be improved if production increases. 
D)  the market is producing too much of the good. 
A)  society's well-being cannot be improved by changing production. 
B)  society's well-being can be improved if production decreases. 
C)  society's well-being can be improved if production increases. 
D)  the market is producing too much of the good.

Question 13

Expenses associated with factors of production may be _____ costs.

Accepted Answer

A)  implicit 
B)  opportunity 
C)  explicit 
D)  implicit,opportunity,or explicit 
A)  implicit 
B)  opportunity 
C)  explicit 
D)  implicit,opportunity,or explicit

Question 14

A person with loss aversion:

Accepted Answer

A)  has a hard time recognizing losing investments and moving on. 
B)  is likely to maximize total revenue rather than profit. 
C)  is unlikely to ignore sunk costs. 
D)  is more likely to use a credit card than to pay cash. 
A)  has a hard time recognizing losing investments and moving on. 
B)  is likely to maximize total revenue rather than profit. 
C)  is unlikely to ignore sunk costs. 
D)  is more likely to use a credit card than to pay cash.

Question 15

The costs economists use in the concept of economic profit are:

Accepted Answer

A)  accounting costs. 
B)  strictly dollar costs,not opportunity costs. 
C)  only implicit costs. 
D)  accounting costs and implicit costs (i.e. ,the value of the best opportunity forgone). 
A)  accounting costs. 
B)  strictly dollar costs,not opportunity costs. 
C)  only implicit costs. 
D)  accounting costs and implicit costs (i.e. ,the value of the best opportunity forgone).

Question 16

Profit computed without implicit costs is _____ profit.

Accepted Answer

A)  explicit 
B)  accounting 
C)  implicit 
D)  economic 
A)  explicit 
B)  accounting 
C)  implicit 
D)  economic

Question 17

Sally must submit a form to enrol in her company's flexible medical benefits programme.Although she has been employed over a year,she has yet to complete the form.Which type of irrational behaviour does this represent?

Accepted Answer

A)  status quo bias 
B)  mental accounting 
C)  loss aversion 
D)  risk aversion 
A)  status quo bias 
B)  mental accounting 
C)  loss aversion 
D)  risk aversion

Question 18

The _____ is the amount by which an additional unit of activity increases its total cost.

Accepted Answer

A)  marginal cost 
B)  average cost 
C)  average profit 
D)  marginal benefit 
A)  marginal cost 
B)  average cost 
C)  average profit 
D)  marginal benefit

Question 19

The implicit cost of capital is:

Accepted Answer

A)  the expense associated with leasing machines. 
B)  the expense associated with buying machines. 
C)  the opportunity cost of capital used by a business. 
D)  irrelevant for determining economic profit. 
A)  the expense associated with leasing machines. 
B)  the expense associated with buying machines. 
C)  the opportunity cost of capital used by a business. 
D)  irrelevant for determining economic profit.

Question 20

Sunk costs:

Accepted Answer

A)  affect economic profit. 
B)  are the losses associated with failed business ventures. 
C)  are an important component of marginal analysis. 
D)  are the same as marginal costs. 
A)  affect economic profit. 
B)  are the losses associated with failed business ventures. 
C)  are an important component of marginal analysis. 
D)  are the same as marginal costs.

Exam 9: Decision Making by Individuals and Firms

In general,when marginal benefit is greater than marginal cost,the decision maker should do _____ of the activity.

When a person makes a quick decision without taking the time to compare the opportunity cost of all possible options,he or she is using:

In economic analysis,at the optimal quantity of an activity:

For MOST firms,economic profit is:

If a star university hockey player turns down a multimillion-dollar offer from the NHL to return for his last year of university,he may be exhibiting:

Suppose that the Toronto Blue Jays could rent out the Rogers Centre (the field they play on)to local youth leagues for $11 000 per month.The $11 000 per month is the _____ cost of capital.

The _____ benefit is the amount by which an additional unit of an activity increases its total benefit.

If a decision maker chooses an option that leaves him or her worse off than choosing another available option,he or she is:

Which type of behaviour is NOT a common mistake that leads to irrational decisions?

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:

Accountants use only _____ costs in their computations of short-run total cost.

If the marginal benefit received from consuming a good is equal to the marginal cost of production:

Expenses associated with factors of production may be _____ costs.

A person with loss aversion:

The costs economists use in the concept of economic profit are:

Profit computed without implicit costs is _____ profit.

Sally must submit a form to enrol in her company's flexible medical benefits programme.Although she has been employed over a year,she has yet to complete the form.Which type of irrational behaviour does this represent?

The _____ is the amount by which an additional unit of activity increases its total cost.

The implicit cost of capital is:

Sunk costs:

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

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