Economics Chapter 8 2 Jason Spends All Afternoon Baking Cake

56. Jason spends all afternoon baking a cake. When it comes out of the oven, it’s burnt and sunken in the

middle, and Jason considers whether he should throw it away or not. If Jason were rational, he would

compare the ______________, which is ______________, to the benefits of eating a burnt, sunken

cake.

57. In economics, choosing one activity means:

58. Economists believe:

59. Marissa walks into a convenience store to buy something to drink. As she stares into the cooler, her

opportunity cost of choosing a Gatorade is:

60. Undervaluing of opportunity cost sometimes occurs because:

61. Carla is deciding whether to go to the movies this afternoon. Behavioral economists predict Carla

likely will:

62. Carlos has been invited to go skiing for the afternoon with his friends. It will cost $40 for a lift ticket. It

is likely Carlos will:

63. Behavioral economists think that the less obvious a person’s opportunity cost is:

64. A consumer is likely to _____________ his opportunity costs when ____________.

65. People are especially prone to undervaluing opportunity costs when

66. Economists believe that people who sit through bad music concerts likely do so because:

67. Economists believe that people who force themselves to always eat everything on their plate at a

restaurant, regardless of how full they might feel, likely do so because:

68. The implicit cost of ownership:

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69. Jim bought a new bike and rides it every day, while his old one sits in the garage untouched.

Jimâ€™s opportunity cost of keeping the old bike is:

70. Howie just bought a new digital camera to replace his old one. His old one works perfectly fine and

would sell on Craigslist for $100. The fact that Howie would not pay $100 for it, yet continues to let it sit in

his closet unused is explained by:

71. Christopher just won tickets to see an NFL football game. His coworker offers to pay him $300 for

them, but Christopher decides to use them, even though he would never pay $300 for them himself.

Christopher’s willingness to consume $300 worth of tickets that he doesn’t value at $300 is attributed to:

72. Kyle receives two free passes to the symphony as a bonus at work. He has never been to the

symphony before and would probably not buy such tickets for their face value of $120. Kyle decides to

use the tickets rather than sell them at face value. This type of behavior is:

73. Claire bought a new TV, and the old one sits in her basement untouched. If Claire were rational, what

would she do with the old TV?

74. Sadie just bought a new karaoke machine to replace her old one. Her old one works perfectly fine and

would sell on Craigslist for $50. The fact that Sadie would not pay $50 for it, yet continues to let it sit in

her closet unused is explained by:

75. Dale just won tickets to see a NASCAR race. His coworker offers to pay him $200 for them, but Dale

decides to use them, even though he would not pay $200 for them himself. Dale’s willingness to consume

$200 worth of tickets that he doesn’t value at $200 is attributed to:

76. Kate receives two free passes to the waterpark for her birthday. She’s not a huge fan of waterparks,

and, therefore, would not buy such tickets for their face value of $90. Kate decides to use the tickets. This

type of behavior is explained with the concept of:

77. Keith just got an iPhone 5 for his birthday, and he quickly switches his data over and throws his

iPhone 4 in a drawer and forgets about it. Economists would say this behavior is ___________ and would

use the concept of ________________ to explain this choice.

78. Grace just got her first cell phone, an iPhone, for graduation. She tosses her iTouch in a drawer and

never touches it again, even though she could easily sell it for $75 on Craigslist. Grace’s choice is

___________ because ________________.

79. Paul wins a $500 watch in a sweepstakes and decides to keep it, even though he says he would have

preferred to win $500 cash. Knowing Paul’s preferences, how can we explain his decision to keep it?

80. The implicit cost of ownership:

81. Why is a sunk cost not part of the opportunity cost of a decision?

82. Money is:

83. Money is:

84. An example of a fungible commodity is:

85. Which of the following is not a fungible commodity?

86. Which of the following is an example of a fungible commodity?

87. Which of the following is not an example of a fungible good?

88. Which of the following is not an example of a fungible commodity?

89. Behavioral economists have found that people ______________, and this leads to irrational

decisions.

90. When people forget that money is ____________ they often make ______________ decisions.

91. When we say that money is fungible, we mean that a dollar spent out of your savings account:

92. Sometimes ignoring that money is fungible can be:

93. When people refuse to pay down debt with their savings:

94. Sam has $500 saved up for his spring break. He also carries about $300 of debt on his credit card. By

choosing not to pay off his credit card with his savings, Sam is:

95. The fungibility of money means that

96. Putting money into mental categories can:

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97. Buddy has $2000 in a checking account and wants to buy a new MacBook for $1100. Buddy decides

he needs the money in his account to pay his bills next month and so puts the $1100 on his credit card

and pays it off gradually over the next several months. Buddy choosing to “save” his cash on hand for

everyday expenses is:

98. John has $4000 in savings to buy an engagement ring for his girlfriend even though he has no plans

to propose in the near future. When his transmission needs to be replaced in his car, John charges the

$2000 worth of auto repair. John’s decision is an example of:

99. Harry’s employer offers a “Holiday Account,” which means they will take $50 a month out of Harry’s

paycheck and deposit it into this account throughout the year. In December, they give Harry the money in

the account to spend during the holidays. Setting up such accounts:

100. Harry’s employer offers a “Holiday Account,” which means they will take $50 a month out of Harry’s

paycheck and deposit it into this account throughout the year. In December, they give Harry the money in

the account to spend during the holidays. Harry regularly carries about $200 of credit card debt each

month. Harry’s decision to set aside some of his money in this account is an example of:

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Chapter 08 Test Bank Summary