20 questions
1. A rational decision benefits the decision maker as
much as possible. To make a rational yes-or-no
decision you should pick the option that has
the highest benefit
b. the lowest cost.
benefits that outweigh the costs.
costs that outweigh the benefits.
Thinking like an economist would lead you to
believe that for a gifted college football player, the
most significant cost of remaining in college for
another year rather than entering the NFL draft is
tuition.
books.
housing.
lost wages.
A student operating on her budget line for shoes
and shirts
would not be able to buy more shirts.
would not be able to buy more shoes.
would not be able to buy more shoes without
buying more shirts.
would not be able to buy more shoes without
buying fewer shirts.
Which of the following would be considered a sunk
cost?
money you will spend to repair your car
money you already spent to buy your car
insurance premiums on your car for the coming
six months
the cost of gasoline to operate your car
The net benefit of a choice is
the benefit of the choice plus the cost of the
choice.
the benefit of the choice minus the cost of the
choice.
the benefit of the choice times the cost of the
choice.
the benefit of the choice divided by the cost of
the choice.
The decision- making rule for making a rational
choice is best described by which of the following?
Always buy the item with the lowest cost.
Always buy the item with the highest benefit.
Always buy the item with the lowest net benefit.
Always buy the item with the highest net
benefit.
The table below lists the benefit and cost of four
different vacation destinations. Based on the
information in the table, a rational consumer
would pick
Six Flags because it is the least expensive.
The Grand Canyon because it has the highest
net benefit.
Disney World because it has the highest benefit.
New Orleans because it has the lowest net
benefit
Which of the following accurately describes the
concept of marginal benefit?
the total benefit derived from consuming all
units of a good
the total benefit derived from consuming all units of a good minus the total cost of consuming all units of the good
the additional benefit of consuming the next
unit of a good
the net benefit of consuming the next unit of a
good
All of the following are mistakes to avoid in making
rational decisions except
letting sunk costs matter.
focusing exclusively on fairness.
making purchases using net benefit analysis.
sticking to the status quo.
The branch of economics called behavioral
economics combines economics and
psychology.
history.
sociology.
accounting.
During major holidays, many retailers run specials. In some cases, the price of the special is higher than the regular price at a non-holiday time. However, we think it is a better deal. What mistake are we making?
allowing the framing of options to affect our decision
letting sunk costs matter
being too impatient
avoiding change even when things could be better
Suppose you are considering moving into a new home. You automatically assume that it will be too much trouble. What kind of mistake are you making?
allowing the framing of options to affect our decision
letting sunk costs matter
being too impatient
sticking to the status quo
What is marginal analysis?
Marginal analysis is the difference between total revenue and total cost.
Marginal analysis is the point at which a business is able to sell all its output.
Marginal analysis is the analysis of the cost and benefits of the marginal change (the addition of one unit) of an input or good.
Marginal analysis is a tool used in finance to calculate interest rates.
The marginal benefit is the
additional cost from one more unit of an activity.
forgone opportunity.
additional gain from one more unit of an activity.
loss of the highest-valued alternative.
A lawn service is deciding whether to add an additional employee to its summer crew. The marginal cost of hiring this worker depends on the
the additional revenue created by having an additional worker.
total amount paid to previously hired workers.
total amount paid to the new worker.
the total amount paid to all the workers, both the new one and the previously hired workers.
A budget line
has a slope equal to a relative price.
shows the limits to what can be consumed.
rotates or shifts only when the consumer's budget changes.
Answers B and C are both correct
Answers A and B are both correct.
Suppose a consumer has $100 to spend on two goods, shoes and shirts. If the price of a pair of shoes is $20 per pair and the price of a shirt is $15 each, which of the following combinations is unaffordable to the consumer?
0 pairs of shoes and 0 shirts
2 pairs of shoes and 4 shirts
5 pairs of shoes and 0 shirts
0 pairs of shoes and 7 shirts
2 pairs of shoes and 3 shirts
The figure above shows Sarah's budget line. Sarah earns $500 per week selling baskets made out of tree vines. With this money she buys sushi and rose bushes. Each piece of sushi costs $1 and each rose bush costs $10. Sarah will be at what point on her budget line if she spends $200 per week on sushi?
Point b
Point c
Point d
Point f
Point a
A consumption point inside the budget line
is unaffordable.
shows that the consumer spends income on only one of the goods.
shows that the consumer has chosen to spend all of his or her income on both products.
is affordable and, because it is inside the budget line, means that all the person's budget has been spent.
is possible to afford but has some unspent income.
I have a major sweet tooth. I particularly enjoy chocolate chip cookies, brownies, and ice cream. The value of the benefits I receive from consuming a serving of each is $1.50, $1.00, and $1.75, respectively. If these items cost me $1.00, $.75, and $1.50, respectively, which should I
choose based on net benefit?
chocolate chip cookies
brownies
ice cream
they are all equally good, based on their net benefits