CHAPTER 1
You are weighing the cost of a cup of coffee against the satisfaction you will obtain from the coffee. Which economic principle are you taking into account?
cost benefit principle
Sunk costs are:
costs that have been incurred and cannot be reversed.
Which of these best describes when starting a business is a good idea?
When financial profits are large enough to offset the cost of the income you forgo
How is an increase in productivity represented on the graph of a production possibility frontier?
By the entire frontier being pushed outward
Charlotte is studying for a psychology exam and an economics exam that are both scheduled for Monday. She would like to study three hours for each exam, but she only has five hours to study, so she must decide whether one exam grade is more important to her than the other. This exemplifies which of the following types of dependency?
Dependencies between your own choices
Which of these best describes what people should base their decisions on?
Opportunity costs
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?
Let the 11th employee go, or do not replace the next employee who quits.
Which two values should a business owner compare before deciding to hire one more worker?
Marginal cost and marginal benefit
In order to ensure that you are applying the opportunity cost principle correctly, when you pose a question, which word or phrase should always appear in the middle of the sentence?
Or
When applying the opportunity cost principle, what should you do if you are able to think of more than one alternative?
Select the best alternative
_____ are ignored in good decision making.
Sunk costs
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
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?
The marginal principle
Which of these best describes the big idea behind the interdependence principle?
What else?
How can a manager maximize the economic surplus when hiring workers?
When the marginal cost of hiring the last worker is equal to the marginal benefit
When are out-of-pocket costs also opportunity costs?
When the out-of-pocket costs do not exist in the next best alternative.
Hyunh has made a chart of the costs and benefits associated with buying a new car. Should she buy a new car? Why or why not?
Yes, because the benefits of buying a car are greater than the costs.
Azmera currently rents an apartment for $900. He has made a chart of the costs and benefits associated with buying a new house. Should he buy a new house? Why, or why not?
Yes, because the benefits of buying a house are greater than the costs.
When you follow the rational rule, you can maximize:
economic surplus.
Hiring another worker is beneficial when the marginal benefit of hiring one more worker _____ the marginal cost, meaning that hiring another worker _____ economic surplus.
exceeds; increases
Changes in prices and opportunities in one market affect the choices a person might make in another market. This is pointed out in the _____ principle.
interdependence
The _____ principle says that the true cost of something is the next best alternative that you must give up to get it.
opportunity cost
When someone considers alternatives before making a decision, they are taking into account the _____principle.
opportunity cost