ECON- Ch 1 LC1

If an employer offers a potential employee $40,000, but the employee would be willing to work for $35,000, and the employer will make $55,000 from the work that the employee does. Assuming that the employee takes the job for $40,000, what is the employer's economic surplus?

$15,000

You make a clay pot for $10 and sell it to a customer for $40. What is your economic surplus associated with the transaction?

$30

When someone considers alternatives before making a decision, they are taking into account the _____ principle.

opportunity cost

_____ is the extra benefit associated with one extra unit.

Marginal benefit

Which best explains why sunk costs should have no bearing on the application of the opportunity cost principle?

Sunk costs will be incurred in both your choice and the next best alternative.

When you confront a problem, which of the four economic principles should you consider second?

The cost-benefit principle

You are trying to decide if you should buy a warmer coat, but realize that the answer to this question will depend on whether you are taking a trip to Canada next month. Which economic principle is taken into account?

The interdependence principle

Roshan is unsure about whether she should work more hours, so she gradually increases the hours that she works each week. When should she stop working more hours?

When an hour of her time is more valuable to her than her hourly pay

You are the CEO of a car manufacturing company, and realize that you may have to lay off 10,000 employees unless you take some other form of action. Your Chief Financial Officer comes up with two solutions: the first saves 6,000 jobs, and the second causes the company to lose 4,000 jobs. The first option sounds ideal at first; however, both options give the same outcome of cutting 4,000 jobs and saving 6,000 jobs. This example represents the concept of:

framing effect

Matthew has been diagnosed with cancer and doctors estimate that he has roughly 5 months to live. From an economic standpoint, which best explains why Matthew might be more likely than a healthy person to take a risky experimental drug?

his opportunity cost is lower than that of healthy people

When a consumer is deciding how many cups of coffee to buy, the marginal benefit he should consider is _____ and the marginal cost he should consider is _____.

his willingness to pay for the next cup of coffee; the price of a cup of coffee

A business owner is thinking about how many workers she should hire. She also thinks about whether she should purchase a larger building for these workers. This refers to the essence of the _____ principle.

interdependence