Deck 1: Thinking Like an Economist

Question 1

The scarcity principle applies to:

A) all decisions.
B) only market decisions,e.g. ,buying a car.
C) only non-market decisions,e.g. ,watching a sunset.
D) only the poor.

Answer 1

A
Explanation: Refer to the examples of the scarcity principle given in the text.

Question 2

According to the cost-benefit principle:

A) the lowest cost activity usually gives the lowest benefit.
B) a person should always choose the activity with the lowest cost.
C) a person should always choose the activity with the greatest benefit.
D) the extra costs and benefits of an activity are more important considerations than the total costs and benefits.

Answer 2

D
Explanation: Recall that the definition of the cost-benefit principle states that the extra benefits and extra costs determine whether an action should be taken.

Question 3

The logical implication of the scarcity principle is that:

A) one will never be satisfied with what one has.
B) as wealth increases,making choices becomes less necessary.
C) as wealth decreases,making choices becomes less necessary.
D) choices must be made.

Answer 3

D
Explanation: The scarcity principle implies that a person cannot have or do everything,but must choose from among alternatives.

Question 4

The cost-benefit principle indicates that an action should be taken:

A) if the total benefits exceed the total costs.
B) if the average benefits exceed the average costs.
C) if the net benefit (benefit minus cost)is zero.
D) if the extra benefit is greater than or equal to the extra costs.

Question 5

Economic questions always deal with:

A) financial matters.
B) political matters.
C) insufficient resources.
D) choice in the face of limited resources.

Question 6

When a person decides to pursue an activity as long as the extra benefits are at least equal to the extra costs,that person is:

A) violating the cost-benefit principle.
B) following the scarcity principle.
C) following the cost-benefit principle.
D) pursuing the activity too long.

Question 7

Whether studying the size of the U.S.economy or the number of children a couple will choose to have,the unifying concept is that wants are:

A) limited,resources are limited,and thus choices must be made.
B) unlimited,resources are limited,and thus choices must be made.
C) unlimited,resources are limited to some but not to others,and thus some people must make choices.
D) unlimited,resources are limited,and thus government needs to do more.

Question 8

The range of topics or issues that fit within the definition of economics is:

A) limited to market activities,e.g. ,buying soap.
B) limited to individuals and firms.
C) extremely wide,requiring only the ideas of choice and scarcity.
D) very limited.

Question 9

If all the world's resources were to magically increase a hundredfold,then:

A) the scarcity principle would still govern behavior.
B) economics would no longer be relevant.
C) the scarcity principle would disappear.
D) tradeoffs would become unnecessary.

Question 10

Economics is best defined as the study of:

A) prices and quantities.
B) inflation and interest rates.
C) how people make choices under the conditions of scarcity and the results of those choices.
D) wages and incomes.

Question 11

Choosing to study for an exam until the extra benefit (improved score)equals the extra cost (mental fatigue)is:

A) not rational.
B) an application of the cost-benefit principle.
C) an application of the scarcity principle.
D) the relevant opportunity cost.

Question 12

Chris has a one-hour break between classes every Wednesday.Chris can either stay at the library and study or go to the gym and work out.The decision Chris must make is:

A) not an economic problem because neither one costs money.
B) not an economic problem because it's an hour that is wasted no matter what Chris does.
C) an economic problem because the tuition Chris pays covers both the gym and the library.
D) an economic problem because Chris has only one hour during which he can study or work out.

Question 13

A rational person is one who:

A) is reasonable.
B) makes choices that are easily understood.
C) possesses well-defined goals and seeks to achieve them.
D) is highly cynical.

Question 14

The central concern of economics is:

A) poverty.
B) scarcity.
C) wealth accumulation.
D) overconsumption.

Question 15

The principle of scarcity applies to:

A) the poor exclusively.
B) all consumers.
C) all firms.
D) everyone-consumers,firms,governments,and nations.

Question 16

Forest is a mountain man living in complete isolation in Montana.He is completely self-sufficient through hunting,fishing,and farming.He has not been in the city to buy anything in five years.One can infer:

A) the scarcity principle does not apply to Forest.
B) Forest is not required to make choices.
C) the scarcity principle still applies because more hunting means less fishing and farming.
D) Forest is very satisfied.

Question 17

The scarcity principle tells us that __________,and the cost-benefit principle tells us __________.

A) choices must be made;how to make the choices
B) choices must be made;that the costs can never outweigh the benefits of the choices
C) rare goods are expensive;that the costs should outweigh the benefits of the choices
D) rare goods are expensive;that the costs can never outweigh the benefits of the choices

Question 18

At the very least,Joe Average and Bill Gates are both identically limited by:

A) their wealth.
B) the 24 hours that comprise a day.
C) their knowledge.
D) their influence.

Question 19

The scarcity principle indicates that:

A) no matter how much one has,it is never enough.
B) compared to 100 years ago,individuals have less time today.
C) with limited resources,having more of "this" means having less of "that".
D) because tradeoffs must be made,resources are therefore scarce.

Question 20

Josh wants to go to the football game this weekend,but he has a paper due on Monday.It will take him the whole weekend to write the paper.Josh decided to stay home and work on the paper.According to the scarcity principle,the reason Josh didn't go to the game is that:

A) Josh prefers schoolwork to football games.
B) writing the paper is easier than going to the game.
C) Josh doesn't have enough time for writing the paper and going to the game.
D) it's too expensive to go to the game.

Question 21

In general,rational decision making requires one to choose the actions that yield the:

A) largest total benefits.
B) smallest total costs.
C) smallest net benefits.
D) largest economic surpluses.

Question 22

Relative to a person who earns minimum wage,a person who earns $30 per hour has:

A) a lower opportunity cost of working longer hours.
B) a higher opportunity cost of taking a day off.
C) a lower opportunity cost of driving farther to work.
D) the same opportunity cost of spending time on leisure activities.

Question 23

The seventh glass of soda that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is eating at the cafeteria).The cost-benefit principle predicts that Tim will:

A) realize he has had too much soda to drink and go home.
B) drink the seventh glass and continue until the marginal benefit of drinking another glass of soda is zero.
C) volunteer to empty out the fountain.
D) not drink the seventh glass.

Question 24

Alex received a four-year scholarship to State U.that covered tuition and fees,room and board,and books and supplies.As a result:

A) attending State U.for four years is costless for Alex.
B) Alex has no incentive to work hard while at State U.
C) the cost of attending State U.is the amount of money Alex could have earned working for four years.
D) the cost of attending State U.is the sum of the benefits Alex would have had attending each of the four other schools to which Alex had been admitted.

Question 25

Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck,but she finds one for $12,000.Her __________ is __________.

A) benefit;$12,000
B) cost;$15,000
C) economic surplus;$3,000
D) economic surplus;$12,000

Question 26

Dean decided to play golf rather than prepare for tomorrow's exam in economics.One can infer that:

A) Dean has made an irrational choice.
B) Dean is doing poorly in his economics class.
C) the economic surplus from playing golf exceeded the surplus from studying.
D) the cost of studying was less than the cost of golfing.

Question 27

The use of economic models,like the cost-benefit principle,means economists believe that:

A) this is exactly how people choose between alternatives.
B) this is a reasonable abstraction of how people choose between alternatives.
C) those who explicitly make decisions this way are smarter.
D) with enough education,all people will start to explicitly make decisions this way.

Question 28

Economic surplus is:

A) the benefit gained by taking an action.
B) the price paid to take an action.
C) the difference between the benefit gained and the cost incurred of taking an action.
D) the wage someone would have to earn in order to take an action.

Question 29

The opportunity cost of an activity is the value of:

A) an alternative forgone.
B) the next-best alternative forgone.
C) the least-best alternative forgone.
D) the difference between the chosen activity and the next-best alternative forgone.

Question 30

The Governor of your state has cut the budget for the University and increased spending on Medicaid.This is an example of:

A) the pitfalls of considering average costs instead of marginal costs.
B) poor normative economic decision making.
C) poor positive economic decision making.
D) choice in the face of limited resources.

Question 31

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20.After the movie,she says to one of her friends that the movie was not worth it.Apparently:

A) Jenna failed to apply the cost-benefit model to her decision.
B) Jenna was not rational.
C) Jenna overestimated the benefits of the movie.
D) Jenna underestimated the benefits of the movie.

Question 32

Janie must either mow the lawn or wash clothes,earning her a benefit of $30 or $45,respectively.She dislikes both equally and they both take the same amount of time.Janie will therefore choose to _________ because the economic surplus is ________.

A) mow the lawn;greater
B) wash clothes;greater
C) mow the law;smaller
D) wash clothes;smaller

Question 33

Sally earned $25,000 per year before she became a mother.After she became a mother,she told her employer that her opportunity cost of working is now $50,000,and so she is not willing to work for anything less.Her decision is based on:

A) the high cost of raising a child.
B) her desire to save for her child's college expenses.
C) her increased value to her employer.
D) the value she places on spending time with her child.

Question 34

Amy is thinking about going to the movies tonight.A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30.The cost of seeing the movie is:

A) $7.
B) $30.
C) $37.
D) $37 minus the benefit of seeing the movie.

Question 35

Larry was accepted at three different graduate schools,and must choose one.Elite U costs $50,000 per year and did not offer Larry any financial aid.Larry values attending Elite U at $60,000 per year.State College costs $30,000 per year,and offered Larry an annual $10,000 scholarship.Larry values attending State College at $40,000 per year.No Name U costs $20,000 per year,and offered Larry a full $20,000 annual scholarship.Larry values attending NoName at $15,000 per year.
The opportunity cost of attending Elite U is:

A) $50,000
B) $10,000
C) $20,000
D) $15,000

Question 36

Jen spends her afternoon at the beach,paying $1 to rent a beach umbrella and $11 for food and drinks rather than spending an equal amount of money to go to a movie.The opportunity cost of going to the beach is:

A) the $12 she spent on the umbrella,food and drinks.
B) only $1 because she would have spent the money on food and drinks whether or not she went to the beach.
C) the movie she missed seeing.
D) the movie she missed seeing plus the $12 she spent on the umbrella,food and drinks.

Question 37

Larry was accepted at three different graduate schools,and must choose one.Elite U costs $50,000 per year and did not offer Larry any financial aid.Larry values attending Elite U at $60,000 per year.State College costs $30,000 per year,and offered Larry an annual $10,000 scholarship.Larry values attending State College at $40,000 per year.NoName U costs $20,000 per year,and offered Larry a full $20,000 annual scholarship.Larry values attending NoName at $15,000 per year.
The opportunity cost of attending State College is:

A) $30,000
B) $20,000
C) $15,000
D) $10,000

Question 38

Larry was accepted at three different graduate schools,and must choose one.Elite U costs $50,000 per year and did not offer Larry any financial aid.Larry values attending Elite U at $60,000 per year.State College costs $30,000 per year,and offered Larry an annual $10,000 scholarship.Larry values attending State College at $40,000 per year.NoName U costs $20,000 per year,and offered Larry a full $20,000 annual scholarship.Larry values attending NoName at $15,000 per year.
Larry maximizes his surplus by attending:

A) Elite U,because $60,000 is greater than the benefit at the other schools.
B) State College,because the difference between the benefit and cost is greatest there.
C) NoName U,because Larry has a full scholarship there.
D) Elite U,because the opportunity costs of attending Elite U are the lowest.

Question 39

Larry was accepted at three different graduate schools,and must choose one.Elite U costs $50,000 per year and did not offer Larry any financial aid.Larry values attending Elite U at $60,000 per year.State College costs $30,000 per year,and offered Larry an annual $10,000 scholarship.Larry values attending State College at $40,000 per year.NoName U costs $20,000 per year,and offered Larry a full $20,000 annual scholarship.Larry values attending NoName at $15,000 per year.
Larry has decided to go to Elite U.Assuming that all of the values described are correct,for Larry to decide on Elite U,he must have:

A) calculated his surplus from each choice and picked the one with the highest surplus.
B) underestimated the benefits of attending No Name.
C) miscalculated the surplus of attending Elite U.
D) determined the opportunity cost of each choice and picked the one with the lowest opportunity cost.

Question 40

Suppose the most you would be willing to pay for a plane ticket home is $250,but you buy one online for $175.The economic surplus of buying the online ticket is:

A) $175.
B) $250.
C) $75.
D) $0.

Question 41

Barry owns a clothing store in the mall and has asked two economic consultants to develop models of consumer behavior that he can use to increase sales.Barry should choose the model that:

A) does not include simplifying assumptions.
B) is the most detailed and complex.
C) assumes that consumers apply the cost-benefit principle.
D) predicts that consumers will always prefer Barry's store to the competing stores.

Question 42

You paid $35 for a ticket (which is non-refundable)to see SPAM,a local rock band,in concert on Saturday.(Assume that you would not have been willing to pay any more than $35 for this concert. )Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert.You will have to work 4 hours and she will pay you time and a half,which is $9/hr.
Your economic surplus of going to work on Saturday is:

A) $0
B) $1
C) $35
D) $36

Question 43

If one fails to account for implicit costs in decision making,then applying the cost-benefit rule will be flawed because:

A) the benefits will be overstated.
B) the costs will be understated.
C) the benefits will be understated.
D) the costs will be overstated.

Question 44

You paid $35 for a ticket (which is non-refundable)to see SPAM,a local rock band,in concert on Saturday.(Assume that you would not have been willing to pay any more than $35 for this concert. )Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert.You will have to work 4 hours and she will pay you time and a half,which is $9/hr.
Should you go to the concert instead of working Saturday?

A) Yes,your benefit is more than your cost.
B) No,your benefit is less than your cost.
C) Yes,your benefit is equal to your cost.
D) No,because there are no benefits in the concert.

Question 45

Suppose a person makes a choice that seems inconsistent with the cost-benefit principle.Which of the following statements represents the most reasonable conclusion to draw?

A) The person (explicitly or implicitly)over-estimated the benefits or under-estimated the costs or both.
B) The cost-benefit principle is rarely true.
C) The person does not grasp how decisions should be made.
D) The person is simply irrational.

Question 46

Economic models claim to be:

A) reasonable abstractions of how people make choices,highlighting the most important factors.
B) exact replications of the decision-making process people use.
C) interesting chalkboard exercises with little applicability to the real world.
D) exceptionally accurate methods of predicting nearly all behavior of everyone.

Question 47

Moe has a big exam tomorrow.He considered studying this evening,but decided to go out with Curly instead.Since Moe always chooses rationally,it must be true that:

A) the opportunity cost of studying tonight is less than the value Moe gets from spending time with Curly.
B) the opportunity cost of studying tonight is equal to the value Moe gets from spending time with Curly minus the cost of earning a low grade on the exam.
C) Moe gets more benefit from spending time with Curly than from studying.
D) Moe gets less benefit from spending time with Curly than from studying.

Question 48

Your classmates from the University of Chicago are planning to go to Miami for spring break,and you are undecided about whether you should go with them.The round-trip airfares are $600,but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare.All other costs for the vacation are exactly $900.The most you would be willing to pay for the trip is $1400.Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation,which your parents are forcing you to attend.The Chicago-Atlanta round-trip airfares are $450.
If you do not use the frequent-flyer coupon to fly,should you go to Miami?

A) Yes,your benefit is more than your cost.
B) No,your benefit is less than your cost.
C) Yes,your benefit is equal to your cost.
D) No,because there are no benefits in the trip.

Question 49

Matt has decided to purchase his textbooks for the semester.His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175,or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170.Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.
The benefit to Matt of buying his books at the bookstore is _____.

A) $5
B) $9
C) $170
D) $175

Question 50

You paid $35 for a ticket (which is non-refundable)to see SPAM,a local rock band,in concert on Saturday.(Assume that you would not have been willing to pay any more than $35 for this concert. )Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert.You will have to work 4 hours and she will pay you time and a half,which is $9/hr.
What is your opportunity cost,if you go to work on Saturday?

A) $0
B) $9
C) $35
D) $36

Question 51

The cost-benefit model used by economists is:

A) unrealistic because it is too detailed and specific to apply to a variety of situations.
B) unrealistic because everyone can think of times when he or she violated the principle.
C) useful because everyone follows it all of the time.
D) useful because most people follow it most of the time.

Question 52

Most people make some decisions based on intuition rather than calculation.This is:

A) irrational,because intuition is often wrong.
B) consistent with the economic model of decision-making,because calculating costs and benefits leads to decision-making pitfalls.
C) consistent with the economic model because people intuitively compare the relative costs and benefits of the choices they face.
D) inconsistent with the economic model,but rational because intuition takes into account non-financial considerations.

Question 53

Most of us make sensible decisions most of the time,because:

A) we know the cost-benefit principle.
B) subconsciously we are weighing costs and benefits.
C) most people know about the scarcity principle.
D) we conduct hypothetical mental auctions when we make decisions.

Question 54

Your classmates from the University of Chicago are planning to go to Miami for spring break,and you are undecided about whether you should go with them.The round-trip airfares are $600,but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare.All other costs for the vacation are exactly $900.The most you would be willing to pay for the trip is $1400.Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation,which your parents are forcing you to attend.The Chicago-Atlanta round-trip airfares are $450.
If you use the frequent-flyer coupon to fly to Atlanta,would you get any economic surplus by making the trip?

A) No,there is a loss of $50.
B) Yes,surplus of $350.
C) Yes,surplus of $400.
D) Yes,surplus of $100.

Question 55

Economic models are intended to:

A) apply to all examples equally well.
B) eliminate differences in the way people behave.
C) generalize about patterns in decision-making.
D) distinguish economics students from everyone else.

Question 56

Your classmates from the University of Chicago are planning to go to Miami for spring break,and you are undecided about whether you should go with them.The round-trip airfares are $600,but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare.All other costs for the vacation are exactly $900.The most you would be willing to pay for the trip is $1400.Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation,which your parents are forcing you to attend.The Chicago-Atlanta round-trip airfares are $450.
If the Chicago-Atlanta round-trip air fare is $350,should you go to Miami?

A) No,there is a loss of $50.
B) No,there is a loss of $100.
C) Yes,there is economic surplus of $50.
D) Yes,there is economic surplus of $400.

Question 57

Economists use abstract models because:

A) every economic situation is unique,so it is impossible to make generalizations.
B) every economic situation is essentially the same,so specific details are unnecessary.
C) they are useful for describing general patterns of behavior.
D) computers have allowed economists to develop abstract models.

Question 58

Pat earns $25,000 per year (after taxes),and Pat's spouse,Chris,earns $35,000 (after taxes).They have two pre-school children.Childcare for their children costs $12,000 per year.Pat has decided to stay home and take care of the children.Pat must:

A) value spending time with the children by more than $25,000.
B) value spending time with the children by more than $12,000.
C) value spending time with the children by more than $13,000.
D) value spending time with the children as much as does Chris.

Question 59

Your classmates from the University of Chicago are planning to go to Miami for spring break,and you are undecided about whether you should go with them.The round-trip airfares are $600,but you have a frequent-flyer coupon worth $500 that you could use to pay part of the airfare.All other costs for the vacation are exactly $900.The most you would be willing to pay for the trip is $1400.Your only alternative use for your frequent-flyer coupon is for your trip to Atlanta two weeks after the break to attend your sister's graduation,which your parents are forcing you to attend.The Chicago-Atlanta round-trip airfares are $450.
What is the opportunity cost of using the coupon for the Miami trip?

A) $100
B) $450
C) $500
D) $550

Question 60

You paid $35 for a ticket (which is non-refundable)to see SPAM,a local rock band,in concert on Saturday.(Assume that you would not have been willing to pay any more than $35 for this concert. )Your boss called and she is looking for someone to cover a shift on Saturday at the same time as the concert.You will have to work 4 hours and she will pay you time and a half,which is $9/hr.
What is the opportunity cost of going to the concert?

A) $1
B) $9
C) $35
D) $36

Question 61

The average benefit of an activity is the:

A) total benefit of the activity divided by the number of units.
B) number of units divided by the total benefit of the activity.
C) number of units times the total benefit of the activity.
D) extra benefit for one additional unit of the activity.

Question 62

Matt has decided to purchase his textbooks for the semester.His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175,or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170.Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.
The benefit to Matt was ____ from driving to campus to buy the concert ticket last week.

A) $2
B) $4
C) $9
D) $16

Question 63

Matt has decided to purchase his textbooks for the semester.His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175,or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170.Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.
According to the cost-benefit principle:

A) it would not be rational for Matt to drive to campus to purchase the books because the $5 saving is only two percent of the cost of the books,and that is much less than the 25 percent he saved on the concert ticket.
B) it would be rational for Matt to drive to campus to purchase the books because it costs less to buy the books there than via the Internet.
C) it would be rational for Matt to drive to campus to purchase the books because the $5 saving is more than he saved by driving there to buy the concert ticket.
D) it would not be rational for Matt to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save.

Question 64

Ginger bought a phone that came with a $10 rebate.Ginger should fill out and mail in the rebate form if:

A) the opportunity cost of the time and trouble of sending in the rebate form is less than $10.
B) the opportunity cost of the time and trouble of sending in the rebate form is more than $10.
C) she would have bought the phone without the rebate,and so sending in the rebate form involves no opportunity cost.
D) Ginger's surplus from purchasing the phone was less than $10.

Question 65

Matt has decided to purchase his textbooks for the semester.His options are to purchase the books via the Internet with next day delivery to his home at a cost of $175,or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170.Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.
Assume the minimum that Matt would be willing to accept to drive to the university campus is equal to the amount he saved on the concert ticket.What would be the amount of his economic surplus if he bought his textbooks at the university bookstore rather than via the Internet?

A) $5
B) $1
C) $50
D) $20

Question 66

Your scholarship depends on your maintaining a 3.5 cumulative GPA.Your GPA for last semester was 3.6,which brought your cumulative GPA down.What must be true?

A) Your marginal grades (last semester's grades)were higher than your overall GPA.
B) Your marginal grades (last semester's grades)were lower than your overall GPA.
C) If this semester's grades are the same as last semester's,your overall GPA will stay the same.
D) If this semester's grades are the same as last semester's,you might lose your scholarship.

Question 67

If the total benefits of watching 1,2,and 3 baseball games on TV are 100,120,and 125 respectively,then the marginal benefits of watching 1,2 and 3 baseball games on TV are:

A) 100,120,and 125 respectively.
B) 100,20,and 5 respectively.
C) 100,609,and 41.67 respectively.
D) 100,240,and 375 respectively.

Question 68

If the marginal costs of 1,2,and 3 hours of talking on the phone are $50,$75,and $105 respectively,then the total costs are of 1,2 and 3 hours of talking on the phone are:

A) $50,$150,and $315 respectively.
B) $50,$41.67,and $115 respectively.
C) $50,$125,and $230 respectively.
D) $50,$175,and $405 respectively.

Question 69

You had to pay $600 (non-refundable)for your meal plan for the Fall semester,which gives you up to 150 meals.If you eat all of the meals,your average cost for a meal equals:

A) $6.
B) $5.
C) $4.
D) $0.25.

Question 70

Dividing the total cost of n units of an activity by n reveals the:

A) average benefit.
B) marginal cost.
C) units per cost.
D) average cost.

Question 71

The extra benefit that comes from an extra unit of activity is called the _________ of the activity.

A) marginal benefit.
B) marginal cost.
C) average benefit.
D) reservation benefit.

Question 72

You save $10 on gas every week since you live close to the bus stop.You have class five days a week.What is your average benefit per day for living close to the bus stop?

A) $10
B) $5
C) $2
D) $1.43

Question 73

The marginal benefit of an activity is the:

A) same as the total benefits of the activity.
B) total benefit divided by the level of the activity.
C) extra benefit associated with an extra unit of the activity.
D) total benefit associated with an extra unit of the activity.

Question 74

Suppose a retail store was offering 10% off all prices on all goods.The incentive to take advantage of the 10% savings is:

A) unrelated to the list price of one good.
B) inversely related to the list price of the good.
C) directly related to the list price of the good.
D) independent of the list price.

Question 75

You had to pay $600 (non-refundable)for your meal plan for Fall semester which gives you up to 150 meals.If you eat only 100 meals,your average cost for a meal equals:

A) $6.
B) $5.
C) $4.
D) $0.25.

Question 76

The extra cost that results from an extra unit of an activity is the:

A) marginal benefit.
B) marginal cost.
C) reservation cost.
D) same as the opportunity cost.

Question 77

You had to pay $600 (non-refundable)for your meal plan for Fall semester,which gives you up to 150 meals.If you eat only 100 meals,your marginal cost for the 100^th meal is:

A) $6
B) $4
C) $0.25
D) $0

Question 78

The marginal cost of an activity is the:

A) change in the cost of the activity that results from an extra unit of the activity.
B) same as the total cost of the activity.
C) ratio of total cost to the level of the activity.
D) change in the level of the activity divided by the change in the cost of the activity.

Question 79

A firm employs Pam to assemble personal computers.Pam can assemble 1 computer if she works 1 hour,4 computers in 2 hours,8 computers in 3 hours,10 computers in 4 hours,and 11 computers in 5 hours.Each computer consists of a motherboard that costs $200,a hard drive that costs $100,a case that costs $20,a monitor that costs $200,a keyboard that costs $60 and a mouse that costs $20.The cost of employing Pam is $40 per hour.
What is the marginal cost of producing the computers Pam assembles during her 3^rd hour of work?

A) $1,200
B) $1,240
C) $2,400
D) $2,440

Question 80

Tony notes that an electronics store is offering a flat $20 off all prices in the store.Tony reasons that if he wants to buy something with a price of $50,it is a good offer,but if he wants to buy something with a price of $500,it is not a good offer.This is an example of:

A) inconsistent reasoning;saving $20 is saving $20.
B) the proper application of the cost-benefit principle.
C) rational choice because in the first case he saves 40% and in the second case he saves 4%.
D) marginal cost equals marginal benefit thinking.