Microeconomics Chapter 9 – Flashcards
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A cost that involves an outlay of money is known as A. an invisible cost. B. an opportunity cost. C. an implicit cost. D. an explicit cost.
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D. an explicit cost.
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Loss aversion can help to explain why A. sunk costs are hard to ignore. B. people engage in mental accounting. C. there is a status quo bias. D. people have unrealistic expectations about the future.
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A. sunk costs are hard to ignore.
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If you choose to spend an additional year in school, the income you forgo by NOT working that year A. is an implicit cost. B. is an explicit cost. C. will always be smaller than the explicit cost of attending school. D. should not be a factor in the decision.
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A. is an implicit cost.
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The principle of either-or decision making advises us to A. choose the alternative with the positive economic profit. B. choose the alternative with the positive accounting profit. C. choose the alternative with the lowest explicit costs. D. choose the alternative with the lowest implicit costs.
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A. choose the alternative with the positive economic profit.
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The value of assets owned by a business is known as its A. explicit cost. B. opportunity cost. C. implicit cost. D. capital.
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D. capital.
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Sunk costs A. should be ignored in decisions about future actions. B. are more important than opportunity costs in decision making. C. are as important as implicit costs in decision making. D. should be the most important factor in decision making.
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A. should be ignored in decisions about future actions.
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A project will generate an economic loss if A. its total implicit and explicit costs are greater than its revenue. B. its revenue is greater than the opportunity cost of resources used. C. its implicit costs are greater than its explicit costs. D. its explicit costs are greater than its implicit costs.
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A. its total implicit and explicit costs are greater than its revenue.
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The fact that marginal cost depends on the quantity already produced is shown by A. the marginal cost curve. B. the marginal analysis method. C. the opportunity cost curve. D. the accounting cost curve.
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A. the marginal cost curve.
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The benefit of doing a little bit more of something is known as A. explicit benefit. B. implicit benefit. C. marginal benefit. D. economic benefit.
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B. marginal benefit.
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The implicit costs of a decision A. arise from the opportunity cost. B. are always less than the explicit costs. C. are always equal to the explicit costs. D. are always greater than the explicit costs.
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A. arise from the opportunity cost.
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Behavioral economics was motivated by an attempt to understand A. why sunk costs should be ignored in decision making. B. how people actually make choices. C. the behavior of marginal cost curves. D. the behavior of marginal benefit curves.
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B. how people actually make choices.
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The optimal quantity is the quantity at which A. total benefit is the highest possible number. B. marginal benefit equals marginal cost. C. marginal benefit exceeds marginal cost by the greatest amount. D. total cost is the lowest possible number.
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B. marginal benefit equals marginal cost.
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Comparing marginal benefits and marginal costs is known as A. forecasting. B. economic accounting. C. spreadsheet analysis. D. marginal analysis.
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D. marginal analysis.
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The additional benefit earned from producing one more unit of a good or service is known as A. marginal benefit. B. economic benefit. C. opportunity benefit. D. accounting benefit.
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A. marginal benefit.
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The accounting profit for a business is A. its revenue minus its explicit costs and implicit costs. B. its revenue minus all opportunity costs. C. its revenue minus its implicit costs and depreciation. D. its revenue minus its explicit costs and depreciation.
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D. its revenue minus its explicit costs and depreciation.
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According to the principle of marginal analysis, the optimal quantity of an activity can be determined by A. finding the lowest-cost level of the activity. B. comparing marginal benefits with marginal costs. C. measuring total cost. D. measuring total benefit.
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B. comparing marginal benefits with marginal costs.
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When housing prices fell in the real estate market downturn, many homeowners with houses to sell refused to accept a selling price below what they had paid as a purchase price, even though there was no hope of receiving a price that high. This illustrates A. mental accounting. B. loss aversion. C. status quo bias. D. overconfidence.
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B. loss aversion.
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Giving gifts A. is not consistent with the principle of bounded rationality. B. lowers a person's economic well-being but may enhance their overall well-being. C. is not rational. D. illustrates a person's preferences for being loss-averse.
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B. lowers a person's economic well-being but may enhance their overall well-being.
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An automatic payroll deduction savings plan is one way of addressing the problem of A. being loss averse. B. having a bias toward the status quo. C. having unrealistic expectations about future behavior. D. misperceiving an opportunity cost.
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C. having unrealistic expectations about future behavior.
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Which of the following decisions is BEST approached with marginal analysis? A. You are trying to decide whether to live alone or to have a roommate. B. You are trying to decide whether to spend your vacation in Florida or in California. C. You are trying to decide how much time to spend cleaning your apartment. D. You are choosing the information to put on a job resume.
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C. You are trying to decide how much time to spend cleaning your apartment.
