Learning curve chapter 1

Let the 11th employee go, or do not replace the next employee who quits

Angela owns a software company with 10 employees. Because she is not sure whether an 11th employee would improve her economic surplus, she hires another employee and notices that her total costs have increased by $1,250 and her total revenue has increased by $1,000. Which of these would be the best course of action for Angela?

exceeds; increases

Hiring another worker is beneficial when the marginal benefit of hiring one more worker _____ the marginal cost, meaning that hiring another worker _____ economic surplus.

interdependence

If a person ignores the _____ principle, she might be tempted to consider each market in isolation.

15,000

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?

The opportunity cost of the entrepreneur's time

If an entrepreneur gives up her job to start a new business, the forgone earnings are:

increase economic surplus

If the marginal benefit of hiring one more worker exceeds the marginal cost, then hiring an additional worker will:

The marginal principle

Nasser owns a business that produces t-shirts, but he is struggling with the dilemma of how many shirts to produce, so he begins by asking himself if he should produce one more shirt. Which economic principle is exemplified by this situation?

dependencies between people or businesses

Natasha starts a small software company, but finds it difficult to hire good software developers since she has a very large competitor half a mile away. This is best explained by which of these interdependencies?

at least as great as the opportunity cost

Taken together, the cost-benefit principle and the opportunity cost principle say that a decision is worth making if the benefits it yields are:

Keep the 25th employee and experiment by hiring an additional employee

Tatyana owns a retail store with 24 employees. Because she is not sure whether a 25th employee would improve her economic surplus, she hires another employee and notices that her total costs have increased by $800 and her total revenue has increased by $1,750. Which of these would be the best course of action for Tatyana?

opportunity cost principle

The _____ helps people make better decisions by forcing them to focus on the real trade-offs they face.

opportunity cost

The _____ principle states that people should assess the consequences of their choice relative to the best of the alternatives.

marginal

When someone asks whether they could improve their circumstance with a little more or less of something, they are taking into account the _____ principle.

Opportunity costs

Which best describes what economists mean when they use the term "costs"?

They find it difficult to ignore sunk costs

Which best explains why entrepreneurs often have a difficult time shutting down their business even if the economic profit from their business is negative?

It is useful in making either/or decisions.

Which of these is NOT true of the marginal principle? -It is used to break down decisions about quantity. -It is applied before the cost-benefit principle. -The rational rule is one of its applications. -It is useful in making either/or decisions.

The marginal principle

Which of these is relevant when you face a decision with an either/or question?

time spent

You are thinking about quitting your job to go back to school. Which of these is not associated with an opportunity cost?

The interdependence 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?

When the cost is less than or equal to $4.

You are willing to pay $4 for a cheeseburger. According to the cost-benefit principle, when should you buy a cheeseburger?

The marginal principle

You have decided that you will buy pizza, but you are still trying to decide how many pieces of pizza you should buy. Which economic principle are you taking into account?

$30

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

When the price of the jeans exceeds $50

Your willingness to pay for a pair of jeans is $50. According to the cost-benefit principle, when should you avoid buying a pair of jeans and instead opt to keep your money?