Question 1

Use the following to answer questions : $$\begin{array}{l}
\text { Marginal Cost of Sweatshirts }\
\begin{array} { l c } 
\hline \text { Quantity } & \
\text { of shirts } & \text { Total cost } \
\hline 0 & \$ 0 \
1 & 9 \
2 & 20 \
3 & 33 \
4 & 48 \
5 & 65 \
\hline
\end{array}
\end{array}$$
-(Table: Marginal Cost of Sweatshirts)Use Table: Marginal Cost of Sweatshirts.The marginal cost of the second sweatshirt is:

Accepted Answer

A)  $9. 
B)  $20. 
C)  $11. 
D)  $29.

Question 2

Use the following to answer questions : $$\begin{array}{l}
\text { Marginal Benefit of Sweatshirts }\
\begin{array} { l c } 
\hline \text { Quantity } & \
\text { of shirts } & \text { Total benefit } \
\hline 0 & \$ 0 \
1 & 16 \
2 & 31 \
3 & 45 \
4 & 58 \
5 & 70 \
\hline
\end{array}
\end{array}$$
-(Table: Marginal Benefit of Sweatshirts)Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the fifth sweatshirt is:

Accepted Answer

A)  $70. 
B)  $14. 
C)  $13. 
D)  $12.

Question 3

For which decision would marginal analysis be relevant?

Accepted Answer

A)  spending $1 000 on a summer vacation or on painting your house 
B)  deciding how much to spend on a summer vacation 
C)  buying a new car or a second-hand car 
D)  eating dinner at home or going out to a restaurant for dinner

Question 4

If at a given quantity _____,the decision maker should do _____ of the activity.

Accepted Answer

A)  MB  MC;less 
D)  MB > MC;none

Question 5

The dormitories of York University are part of its:

Accepted Answer

A)  land. 
B)  labour. 
C)  capital. 
D)  explicit costs.

Question 6

Accounting profit takes into account explicit costs,but economic profit does not.

Accepted Answer

A) True 
 B)False

Question 7

Part of the explicit cost of owning a restaurant is rent paid for the kitchen equipment.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions :
Figure: The Marginal Analysis of Cell Phones 
-(Figure: The Marginal Analysis of Cell Phones)Use Figure: The Marginal Analysis of Cell Phones.You are considering purchasing cell phones.How many cell phones will you consume?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4

Question 9

To maximize her grade in economics,Stacey should study until her:

Accepted Answer

A)  marginal cost of studying begins to increase. 
B)  marginal benefit of studying begins to decrease. 
C)  marginal benefit of studying equals her marginal cost of studying. 
D)  marginal cost of studying reaches zero.

Question 10

Economic profit is:

Accepted Answer

A)  less than accounting profit if implicit costs exist. 
B)  always equal to accounting profit. 
C)  greater than accounting profit if implicit costs exist. 
D)  less than accounting profit if implicit costs are zero.

Question 11

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.The marginal cost of the third slice is:

Accepted Answer

A)  $4.50. 
B)  $10. 
C)  $1. 
D)  $2.

Question 12

People are willing to buy insurance because of:

Accepted Answer

A)  risk aversion. 
B)  the status quo. 
C)  the miscalculation of opportunity costs. 
D)  bounded rationality.

Question 13

An "either-or" decision entails:

Accepted Answer

A)  deciding how much of an activity to do. 
B)  a choice between two activities. 
C)  calculating marginal costs for each activity. 
D)  calculating the marginal benefits for each activity.

Question 14

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.Sal orders two slices.From this,we know that Sal's marginal benefit from the second slice must be at least _____ and the marginal benefit from the third slice must be less than _____.

Accepted Answer

A)  $3.50;$4.50 
B)  $3.50;$1.00 
C)  $1.50;$1.00 
D)  $1.50;$4.50

Question 15

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

Accepted Answer

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

Question 16

Suppose that a local floral shop has explicit costs of $200 000 per year and implicit costs of $50 000 per year.If the store earned an economic profit of $50 000 last year,the store's accounting profit equalled:

Accepted Answer

A)  $10 000. 
B)  $50 000. 
C)  $100 000. 
D)  $200 000.

Question 17

Use the following to answer questions : $$\begin{array}{l}
\text { Marginal Cost of Sweatshirts }\
\begin{array} { l c } 
\hline \text { Quantity } & \
\text { of shirts } & \text { Total cost } \
\hline 0 & \$ 0 \
1 & 9 \
2 & 20 \
3 & 33 \
4 & 48 \
5 & 65 \
\hline
\end{array}
\end{array}$$
-Constant marginal costs occur when production of each individual unit costs:

Accepted Answer

A)  less than the previous one. 
B)  more than the previous one. 
C)  the same as the previous one. 
D)  more than the next one.

Question 18

Sunk costs:

Accepted Answer

A)  are not considered in marginal analysis. 
B)  help to determine the optimal quantity of an activity. 
C)  can dramatically increase marginal costs. 
D)  are the same as variable costs.

Question 19

Since they have already paid for their tickets,it does not make economic sense for fans to leave before a game is finished.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  explicit costs;implicit costs 
B)  accounting profit;economic profit 
C)  marginal benefits;marginal costs 
D)  present value;net present value

Exam 9: Decision Making by Individuals and Firms

For which decision would marginal analysis be relevant?

If at a given quantity _,the decision maker should do _ of the activity.

The dormitories of York University are part of its:

Accounting profit takes into account explicit costs,but economic profit does not.

Part of the explicit cost of owning a restaurant is rent paid for the kitchen equipment.

Use the following to answer questions : Figure: The Marginal Analysis of Cell Phones -(Figure: The Marginal Analysis of Cell Phones) Use Figure: The Marginal Analysis of Cell Phones.You are considering purchasing cell phones.How many cell phones will you consume?

To maximize her grade in economics,Stacey should study until her:

Economic profit is:

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.The marginal cost of the third slice is:

People are willing to buy insurance because of:

An "either-or" decision entails:

Pauli's Pizza offers one slice for $2,two slices for $3.50,three slices for $4.50,and four slices for $5.00.Sal orders two slices.From this,we know that Sal's marginal benefit from the second slice must be at least _ and the marginal benefit from the third slice must be less than _.

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

Suppose that a local floral shop has explicit costs of $200 000 per year and implicit costs of $50 000 per year.If the store earned an economic profit of $50 000 last year,the store's accounting profit equalled:

Sunk costs:

Since they have already paid for their tickets,it does not make economic sense for fans to leave before a game is finished.

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