Page 21
92.
(Table: Marginal Analysis of Sweatshirt Production I) Use Table: Marginal Analysis of
Sweatshirt Production I. The optimal quantity of sweatshirts to produce is:
A)
2.
B)
3.
C)
4.
D)
5.
93.
(Table: Marginal Analysis of Sweatshirt Production I) Use Table: Marginal Analysis of
Sweatshirt Production I. The profit at the optimal quantity of sweatshirts is:
A)
$8.
B)
$12.
C)
$45.
D)
$70.
Use the following to answer questions 94-95:
94.
(Table: Marginal Analysis of Sweatshirt Production II) Use Table: Marginal Analysis of
Sweatshirt Production II. The optimal quantity of sweatshirts to produce is:
A)
2.
B)
3.
C)
4.
D)
5.
95.
(Table: Marginal Analysis of Sweatshirt Production II) Use Table: Marginal Analysis of
Sweatshirt Production II. The profit at the optimal quantity of sweatshirts is:
A)
$15.
B)
$16.
C)
$48.
D)
$80.
Page 22
96.
To determine the quantity of any activity that will maximize total profit, economists
employ the:
A)
average decision rule.
B)
total decision rule.
C)
principle of marginal analysis.
D)
principle of average analysis.
97.
The activities of consumers and firms:
A)
have benefits but not costs.
B)
have costs but not benefits.
C)
have both costs and benefits.
D)
are too complex to be analyzed with economic theory.
Use the following to answer questions 98-102:
98.
(Table: Marginal and Total Benefit) Use Table: Marginal and Total Benefit. Sid is
deciding how many football games he wants to attend this year. His marginal benefit
from increasing the number of games that he attends from 2 to 3 is:
A)
40.
B)
30.
C)
10.
D)
20.
Page 23
99.
(Table: Marginal and Total Benefit) Use Table: Marginal and Total Benefit. Sid is
deciding how many football games he wants to attend this year. If tickets to each
football game cost $10, then he should attend _____ game(s).
A)
0
B)
1
C)
2
D)
5
100.
(Table: Marginal and Total Benefit) Use Table: Marginal and Total Benefit. Sid 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)
1
C)
2
D)
5
101.
(Table: Marginal and Total Benefit) Use Table: Marginal and Total Benefit. Sid is
deciding how many football games he wants to attend this year. If the games are free,
how many games should he attend?
A)
1
B)
5
C)
7
D)
8
102.
(Table: Marginal and Total Benefit) Use Table: Marginal and Total Benefit. Sid is
deciding how many football games he wants to attend this year. Suppose football tickets
cost $10, but suppose, too, that the star player just got injured and will be out for the
season. As a result of the injury, Sid’s total benefit of attending any game is now only
10% of the value shown in the table. In this case, how many games should he attend?
A)
0
B)
1
C)
2
D)
6
Page 24
Use the following to answer questions 103-106:
103.
(Figure: The Optimal Quantity) Use Figure: The Optimal Quantity. If the marginal
benefit of lawn mowing increased, the marginal _____ curve in the figure would shift to
the _____ and the optimal quantity would be _____ than five lawns mowed.
A)
benefit; right; more
B)
cost; right; fewer
C)
benefit; left; fewer
D)
cost; left; more
104.
(Figure: The Optimal Quantity) Use Figure: The Optimal Quantity. If the marginal
benefit of lawn mowing decreased, the marginal _____ curve in the figure would shift to
the _____ and the optimal quantity would be _____ than five lawns mowed.
A)
benefit; right; more
B)
cost; right; fewer
C)
benefit; left; fewer
D)
cost; left; more
105.
(Figure: The Optimal Quantity) Use Figure: The Optimal Quantity. If the cost of lawn
mowing decreased for all quantities of lawns mowed, the marginal _____ curve in the
figure would shift to the _____ and the total profit would _____.
A)
benefit; right; increase
B)
cost; right; increase
C)
benefit; left; decrease
D)
cost; left; decrease
Page 25
106.
(Figure: The Optimal Quantity) Use Figure: The Optimal Quantity. If the cost of lawn
mowing increased for all quantities of lawns mowed, the marginal _____ curve in the
figure would shift to the _____ and the total profit would _____.
A)
benefit; right; increase
B)
cost; right; increase
C)
benefit; left; decrease
D)
cost; left; decrease
Use the following to answer questions 107-110:
107.
(Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and
Marginal Costs. More time spent studying economics adds points to economics scores
(MB) but subtracts points from accounting scores (MC). When Claudia studies
economics for four hours, the marginal benefit is _____ points; when she studies for 6
hours, the marginal benefit is _____ points.
A)
20; 10
B)
30; 10
C)
20; 0
D)
20; 30
108.
(Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and
Marginal Costs. More time spent studying economics adds points to economics scores
(MB) but subtracts points from accounting scores (MC). The marginal benefit of
studying economics for two hours is _____ points, and the marginal cost is _____
points.
A)
40; 0
B)
30; 10
C)
20; 20
D)
10; 30
Page 26
109.
(Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and
Marginal Costs. More time spent studying economics adds points to economics scores
(MB) but subtracts points from accounting scores (MC). The marginal benefit of
studying economics for 4 hours is _____ points, and the marginal cost is _____ points.
A)
30; 30
B)
20; 10
C)
20; 20
D)
30; 10
110.
(Figure: Marginal Benefits and Marginal Costs) Use Figure: Marginal Benefits and
Marginal Costs. More time spent studying economics adds points to economics scores
(MB) but subtracts points from accounting scores (MC). At 4 hours of study, Claudia
will maximize her benefit from study time because:
A)
MB > MC.
B)
MB = 20 and MC = 5.
C)
the difference between total benefits and total costs is maximized.
D)
sunk costs are minimized.
Use the following to answer questions 111-115:
111.
(Table: Expected Exam Scores from Studying Economics and Accounting) Use Table:
Expected Exam Scores from Studying Economics and Accounting. If you studied for a
total of 3 hours, your combined scores would be maximized by spending _____ hours
studying economics.
A)
1
B)
2
C)
3
D)
4
Page 27
112.
(Table: Expected Exam Scores from Studying Economics and Accounting) Use Table:
Expected Exam Scores from Studying Economics and Accounting. If you studied for a
total of 3 hours, your combined scores would be maximized by spending _____ hours
studying accounting.
A)
0
B)
1
C)
2
D)
3
113.
(Table: Expected Exam Scores from Studying Economics and Accounting) Use Table:
Expected Exam Scores from Studying Economics and Accounting. If you studied for a
total of 3 hours and divided your time to maximize your combined scores, you would
expect your combined scores to be _____ points.
A)
145
B)
150
C)
155
D)
165
114.
(Table: Expected Exam Scores from Studying Economics and Accounting) Use Table:
Expected Exam Scores from Studying Economics and Accounting. The opportunity (or
marginal) cost in terms of your accounting score of spending the first hour studying
economics is _____ points.
A)
0
B)
5
C)
10
D)
15
115.
(Table: Expected Exam Scores from Studying Economics and Accounting) Use Table:
Expected Exam Scores from Studying Economics and Accounting. The marginal benefit
in terms of your economics score of spending the first hour studying economics is
_____ points.
A)
5
B)
10
C)
15
D)
20
Page 28
Use the following to answer questions 116-120:
116.
(Table: Tutoring) Use Table: Tutoring. Sigmund faces:
A)
increasing marginal benefit.
B)
decreasing marginal benefit.
C)
increasing marginal cost.
D)
constant marginal cost.
117.
(Table: Tutoring) Use Table: Tutoring. If he can charge all students their willingness to
pay, Sigmund’s optimal number of tutoring hours is:
A)
5.
B)
4.
C)
3.
D)
2.
118.
(Table: Tutoring) Use Table: Tutoring. If he can charge all students their willingness to
pay, at the optimal hours of tutoring, Sigmund’s total profit is:
A)
$60.
B)
$50.
C)
$30.
D)
$15.
Page 29
119.
(Table: Tutoring) Use Table: Tutoring. If the college requires all tutors to register with
the dean and charges each tutor $10 to register, Sigmund’s optimal number of tutoring
hours will be:
A)
5.
B)
4.
C)
3.
D)
2.
120.
(Table: Tutoring) Use Table: Tutoring. If the college requires all tutors to register with
the dean and charges each tutor $10 to register and if Sigmund can charge all students
their willingness to pay, his total profit from tutoring will be:
A)
$10.
B)
$20.
C)
$30.
D)
$40.
121.
(Table: The Cost of Producing Gadgets) Use Table: The Cost of Producing Gadgets.
According to this table, the marginal cost is:
A)
increasing at a constant rate equal to $5.
B)
increasing at an increasing rate.
C)
increasing at a decreasing rate.
D)
constant and equal to $5.
Page 30
122.
(Table: The Benefit of Producing Gadgets) Use Table: The Benefit of Producing
Gadgets. The marginal benefit of consuming gadgets is:
A)
constant and equal to $5.
B)
decreasing at a constant rate of $5.
C)
decreasing..
D)
increasing at a decreasing rate.
123.
(Table: The Cost and Benefit of Producing Gadgets) Use Table: The Cost and Benefit of
Producing Gadgets. How many gadgets should you produce?
A)
2
B)
3
C)
4
D)
5
Use the following to answer questions 124-125:
Page 31
124.
(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?
A)
1
B)
2
C)
3
D)
4
125.
(Figure: The Marginal Analysis of Cell Phones) Use Figure: The Marginal Analysis of
Cell Phones. You are considering purchasing cell phones for your department. If you
buy the fifth cell phone, your change in total profit will be equal to:
A)
$0.
B)
–$2.
C)
$2.
D)
$4.
126.
You have rented your first apartment, signing a lease that commits you to pay $500 each
month for 12 months. You have an opportunity to take a trip to Europe during the entire
month of June, and you will spend $2,000 traveling. Your apartment will be vacant, but
because of your lease, you must still pay the rent. The cost of taking the trip to Europe
is:
A)
$2,000 because the $500 for your June rent is a sunk cost.
B)
$2,500 because this is your total spending during the month of June.
C)
$1,500 because the June rent is an opportunity cost of traveling that must be
deducted from the explicit cost of the trip.
D)
$2,500 because the June rent is an opportunity cost of traveling and must be added
to the explicit cost of the trip.
127.
Denaro pays $8,000 per month in rent to operate a health club in Memphis. He also pays
$17,000 per month in wages, $3,000 per month in food and supplies, and $1,000 per
month in insurance. All of his costs of production, except his insurance and rent, can
change if he makes different decisions about his health club production. Denaro’s
monthly sunk costs equal:
A)
$20,000.
B)
$11,000.
C)
$29,000.
D)
$9,000.
Page 32
128.
You plan to attend a movie on Saturday night. You buy a ticket for $7 and then lose it.
According to marginal analysis, you should:
A)
go home.
B)
buy another ticket and attend the movie.
C)
buy another ticket and attend the movie only if your marginal benefit of seeing the
movie is more than $14.
D)
look for the lost ticket.
129.
Sunk costs:
A)
affect economic profit.
B)
are the losses associated with failed business ventures.
C)
are an important component of marginal analysis.
D)
are the same as marginal costs.
130.
Ian is such a big Braves fan that his benefit of seeing a Braves game is $200. He pays
$100 for a ticket to see one of their playoff games. Unfortunately, he left the ticket in his
jeans when he laundered them and the ticket was destroyed. According to marginal
analysis, Ian should:
A)
not go to the game.
B)
buy another ticket for $100 and attend the game.
C)
buy another ticket and attend the game only if he can buy the ticket for less than
$100.
D)
watch the game on TV.
131.
One of Jessuina’s New Year’s resolutions was to exercise more, so she bought an annual
membership to the gym that allows unlimited visits. Unfortunately, the gym is so
crowded and noisy that Jessuina leaves every day with a headache, without working out
at all. According to marginal analysis, Jessuina should:
A)
continue using the gym for the year, since she has already paid for the membership.
B)
join another gym only if a membership is cheaper at the new gym.
C)
join another gym only if she can get a refund on her current membership.
D)
stop using the gym.
132.
Sunk costs:
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.
Page 33
133.
After three years at an expensive college, Pierre realizes that he doesn’t want to finish
school but really wants to be a chef. When Pierre suggests that he leave college for
culinary school, his parents insist that he stay for one more year to get his degree. Which
statement is TRUE?
A)
Pierre’s parents are correct: if he leaves college, it is as though he has wasted three
years of tuition.
B)
Pierre’s parents are wrong: the marginal benefit to Pierre of another year of college
is less than the marginal cost of college.
C)
Pierre’s parents are wrong: the marginal benefit to Pierre of another year of college
is greater than the marginal cost of college.
D)
It is impossible to tell who is correct.
134.
Economists’ and psychologists’ attempts to understand and explain why people make
decisions that appear to be irrational is the field of study called _____ economics
A)
international
B)
irrational
C)
rational
D)
behavioral
135.
The purpose of behavioral economics is to determine why:
A)
people maximize utility.
B)
firms maximize profit and minimize costs.
C)
people make decisions that appear to be irrational.
D)
markets usually behave in an efficient manner.
136.
When a decision maker chooses the option leading to the outcome that he or she most
prefers, he or she has made a _____ decision.
A)
irrational
B)
rational
C)
profit-maximizing
D)
loss-minimizing
137.
A rational economic decision:
A)
must always result in the largest economic payoff.
B)
usually results in the smallest economic payoff.
C)
may or may not result in the largest economic payoff.
D)
is concerned with efficiency but not with equity or fairness.
Page 34
138.
The decision to tip a server is a(n):
A)
rational decision if the person leaving the tip is concerned about fairness.
B)
irrational economic decision because it reduces the economic payoff of the tipper.
C)
example of decision making using bounded rationality.
D)
example of behavior based on risk aversion.
139.
The decision to give a birthday present to a friend is:
A)
decision making using bounded rationality.
B)
behavior based on risk aversion.
C)
a rational decision if the person giving the gift is concerned about the recipient’s
welfare.
D)
an irrational economic decision because it reduces the economic payoff of the
person giving the gift.
140.
When a person makes a choice that is close to but not exactly the one that leads to the
best possible economic outcome, he or she is:
A)
making an irrational decision.
B)
usually ignoring opportunity costs.
C)
being overconfident.
D)
operating with bounded rationality.
141.
When a person makes a quick decision without taking the time to compare the
opportunity cost of all possible options, he or she is using:
A)
bounded rationality.
B)
risk aversion.
C)
loss aversion.
D)
the status quo.
142.
The “good enough” method of decision making is also called:
A)
utility-maximizing behavior.
B)
profit-maximizing behavior.
C)
bounded rationality.
D)
irrational decision making.
Page 35
143.
Suppose Joan buys a new refrigerator to replace her old one that suddenly quit working.
If Joan buys the model on closeout sale and doesn’t take time to do research on repair
records and energy efficiency of various other models, she is using:
A)
status quo decision making.
B)
bounded rationality.
C)
marginal analysis.
D)
risk aversion.
144.
Which statement is an example of bounded rationality?
A)
Ann proofreads her term paper six times.
B)
Mary feels that she has studied enough to make an A+ on her economics exam but
studies another two hours just to be sure.
C)
Tim studies only an hour on the morning of his economics exam because he is
satisfied just to make a passing grade.
D)
Terry does his economics homework twice to be sure that he has a thorough
understanding of the topic.
145.
The willingness to sacrifice some economic payoff to avoid a potential loss is:
A)
irrational behavior.
B)
bounded rationality.
C)
the result of a concern about fairness.
D)
risk aversion.
146.
A person who is risk averse:
A)
always makes irrational decisions.
B)
always makes rational decisions.
C)
is willing to pay to avoid economic loss.
D)
enjoys taking risks.
147.
People are willing to buy insurance because of:
A)
risk aversion.
B)
the status quo.
C)
the miscalculation of opportunity costs.
D)
bounded rationality.