Microeconomics Chapter 9 Answers

question

Pauli’s Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost of the third slice to Hui is: A. $1. B. $4.50. C. $10. D. $2.
answer

A. $1
question

Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college? A. textbooks B. tuition C. computer lab fees D. the salary that she could have earned working full-time
answer

D. the salary that she could have earned working full-time
question

(Figure: Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. According to the marginal benefit curve, the total benefit of mowing six lawns is approximately: A. $154. B. $19. C. $35. D. $200.
answer

A. $154
question

After earning your BA, you have to decide whether to accept the offer of a job that will pay you $45,000 per year or spend an additional two years earning an MBA. If you decide to pursue the graduate degree, your annual expenses for tuition, books, board, and lodging will be $32,000. You have been offered a scholarship for $10,000 per year, but in order to pay the remaining $22,000 per year, you would have to cash in savings bonds that your grandparents have given you that have been earning $500 in interest per year. The annual opportunity cost of earning your MBA is: A. $67,500. B. $77,000. C. $99,000. D. $77,500.
answer

A. $67,500
question

(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is: A. $11. B. $20. C. $29. D. $9.
answer

A. $11
question

The amount by which an additional unit of an activity increases total benefit is: A. net benefit. B. marginal cost. C. marginal benefit. D. utility.
answer

C. marginal benefit
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(Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fourth sweatshirt is: A. $9. B. $15. C. $24. D. $20.
answer

B. $15
question

Whenever marginal benefit is greater than marginal cost, the decision maker should do ________ of the activity. A. none B. more C. less D. that exact amount
answer

B. more
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(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. According to the marginal cost curve, the approximate total cost of mowing seven lawns is: A. $24. B. $175. C. $50. D. $113.
answer

D. $113
question

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

C. the opportunity cost of capital used by a business
question

Accountants use only ________ costs in their computations of cost. A. explicit B. variable C. implicit D. opportunity
answer

A. explicit
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Costs that are included in the economic concept of cost but that are not explicit costs are: A. accounting profits. B. implicit costs. C. economic profits. D. outlay costs.
answer

B. implicit costs
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Constant marginal costs occur when each individual unit costs A. less than the previous one to produce. B. the same to produce as the previous one. C. more than the previous one to produce. D. nothing to produce.
answer

B. the same to produce as the previous one
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(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the fourth sweatshirt is: A. $58. B. $14. C. $12. D. $13.
answer

D. $13
question

In economics, a marginal value refers to: A. a value that is most appropriately identified in a footnote. B. a value entered as an explanatory item in the margin of a balance sheet or other accounts. C. the value associated with one more unit of an activity. D. the value associated with an unimportant, or marginal, activity.
answer

C. the value associated with one more unit of an activity
question

Pauli’s Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, 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 ________, while the marginal benefit from the third slice must be less than ________. A. $3.50; $1.00 B. $3.50; $4.50 C. $1.50; $4.50 D. $1.50; $1.00
answer

D. $1.50; $1.00
question

(Figure: Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve. According to the marginal benefit curve, the total benefit of mowing four lawns is approximately: A. $80. B. $35 C. $114. D. $25
answer

C. $114
question

Suppose the Chicago Cubs could rent out Wrigley Field (the field the players play on) to local youth leagues for $11,000 per month. The $11,000 per month reflects the ________ of capital. A. explicit cost B. total cost C. direct cost D. implicit cost
answer

D. implicit cost
question

The amount by which an additional unit of an activity increases total cost is: A. net benefit. B. negative benefit. C. marginal cost. D. marginal benefit.
answer

C. marginal cost
question

At whatever quantity MB = MC, the decision maker should do ________ of the activity. A. none B. that amount C. less D. more
answer

B. that amount
question

Werner installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs eight systems per day, his total costs are $400. William will install eight sound systems per day only if the eighth customer is willing to pay at least: A. $400. B. $300. C. $50. D. $100.
answer

D. $100
question

(Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the demand for lawn-mowing decreased, the ________ curve in the figure would shift to the ________ and the optimal quantity would be ________ five lawns mowed. A. marginal benefit; right; more than B. marginal benefit; left; fewer than C. marginal cost; right; fewer than D. marginal cost; left; more than
answer

B. marginal benefit; left; fewer than
question

While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice. You then conclude: A. you will be better off if you eat one more slice. B. the total cost of eating the pizza will be more than the total benefit of eating the pizza. C. you will be worse off if you eat one more slice. D. you will be no better off and no worse off from eating one more slice.
answer

A. you will be better off if you eat one more slice
question

Accounting profit differs from economic profit because: A. economic costs include depreciation, while accounting costs do not. B. of differences in the manner in which revenue is calculated. C. economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only. D. accounting costs are generally higher than economic costs because accounting costs include explicit and implicit costs, while economic costs include only explicit costs.
answer

C. economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only
question

At whatever quantity ________, the decision maker should do ________ of the activity. A. MB MC; none C. MB MC; less
answer

C. MB < MC; less
question

(Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs. As shown, more time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC). The marginal benefit of studying economics when Claudia studies for 2 hours is ________ points and the marginal cost is ________ points. A. 40; 0 B. 20; 20 C. 30; 10 D. 10; 30
answer

C. 30; 10
question

Marginal analysis is relevant for: A. both “either-or” and “how much” decisions. B. only “how much” decisions. C. only those situations where the time value of money is involved. D. only “either-or” decisions.
answer

B. only “how much” decisions
question

The purpose of behavioral economics is to determine why: A. firms maximize profit and minimize costs. B. people maximize utility. C. people make decisions that appear to be irrational. D. markets usually behave in an efficient manner.
answer

C. people make decisions that appear to be irrational
question

Marginal benefit: A. is the addition to total benefit due to undertaking one more unit of an activity. B. is the subsidiary benefit from an activity; for example, the main benefit from weight training is an increase in muscle mass, and the subsidiary or marginal benefit might be a reduction in cholesterol. C. normally increases as more of an activity is undertaken. D. must be increasing if total benefit is increasing.
answer

A. is the addition to total benefit due to undertaken one more unit of an activity
question

The willingness to sacrifice some economic payoff in order to avoid a potential loss is: A. irrational behavior. B. the result of a concern about fairness. C. risk aversion. D. bounded rationality.
answer

C. risk aversion
question

(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the second sweatshirt is: A. $16. B. $31. C. $14. D. $15.
answer

D. $15
question

(Figure: The Marginal Analysis of Cell Phones) Look at the figure The Marginal Analysis of Cell Phones. You are considering purchasing cell phones for your department. The graph represents your marginal benefit and marginal cost curves. How many cell phones will you consume? A. 2 B. 1 C. 4 D. 3
answer

C. 4
question

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

C. are not considered in marginal analysis
question

(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. According to the marginal cost curve, the total cost of mowing four lawns is approximately: A. $15. B. $10. C. $50. D. $100.
answer

C. $50
question

(Table: Marginal Analysis of Sweatshirt Production I) Given the information in the table, the net benefit at the optimal quantity of sweatshirts is: A. $8. B. $70. C. $9. D. $45.
answer

C. $9
question

Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store’s accounting profit equaled: A. $94,000. B. $2,050,000. C. $2,044,000. D. $6,000.
answer

A. $94,000
question

(Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the cost of producing lawn-mowing increased, the ________ curve in the figure would shift to the ________ and the total net gain would ________. A. marginal cost; right; increase B. marginal benefit; right; increase C. marginal benefit; left; decrease D. marginal cost; left; decrease
answer

D. marginal cost; left; decrease
question

(Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. If tickets to each football game cost $75, how many games should he attend? A. 0 B. 5 C. 2 D. 1
answer

A. 0

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