Econ SB1

If the equation C = 1 + 0.50H is graphed with C on the vertical axis and H on the horizontal axis, then the vertical intercept will be:

1

Kimberley is studying for her math exam. If she studies for 5 hours she knows she'll get an 80, and if she studies for 6 hours, she knows she'll get a 90. Thus, the marginal benefit of the 6th hour of studying is Blank______.

10 points

If the equation M = 20 + 12H is graphed with M on the vertical axis and H on the horizontal axis, then the vertical intercept will be:

20

While on vacation, you decide to rent a bike. Let C be the total dollar cost of renting a bike, and let H be the number of hours you use the bike. One bike rental company computes the cost of renting a bike as C = 10 + 10H, while the other computes the cost as C = 40 + 5H. If you use the bike for Blank______ hours, then the cost of renting the bike will be the same at either company.

6 Reason: One way to find the value of H such that the cost is the same at either company is to find the value of H such that 10 + 10H = 40 + 5H. Solving this equation, we find that H = 6. Plugging this back into the cost equation at either company, we find that the cost is $70 at either company when H = 6.

Suppose you pay $35 to reserve a camp site at a local state park. The rules specify that you can only receive a refund if you cancel your reservation 2 weeks before your trip. Several days before your trip, you learn that it's supposed to rain the whole time you had planned to camp, and you are having second thoughts about going. Should the $35 you paid for the camp site factor into your decision about whether to go camping?

No Reason: Several days before your trip, the $35 you paid for the camp site is a sunk cost (regardless of whether you go camping, the $35 is gone). So the $35 you paid for the camp site should not factor into your decision about whether to go camping.

Suppose you're trying to decide what to cook for dinner. Both the chicken and the salmon you have in your fridge are about to go bad, and whichever one you don't eat tonight, you'll have to throw away. In deciding which one to cook, should it matter to you that the salmon was slightly more expensive than the chicken?

No. Reason: The amount you spent on the food is a sunk cost and shouldn't factor into your decision. You should just cook whichever one sounds better to you!

When assessing the costs and benefits associated with taking an action, it is generally best to consider costs and benefits

as absolute dollar amounts rather than proportions.

People sometimes apply the Cost-Benefit Principle incorrectly because they evaluate costs and benefits Blank______.

as proportions rather than absolute dollar amounts

In the textbook, opportunity cost includes

both explicit costs and implicit costs

Learning more about economic models

can help us make better decisions even if most people don't consciously use economic models to make decisions.

A variable that determines the value of another variable in an equation is known as a(n) Blank______ variable.

independent

If undertaking an activity includes both explicit and implicit costs, then, according to the textbook, the opportunity cost of that activity Blank______.

is the sum of its explicit and implicit costs

One common decision pitfall is to Blank______.

measure costs and benefits as proportions rather than absolute dollar amounts

the value of what must be foregone in order to undertake an activity is the -------cost of that activity.

opportunity

The average benefit of carrying out an activity is Blank______

the total benefit of undertaking n units of an activity divided by n

Economic models are useful in explaining and predicting behavior only to the extent that people are consciously aware of those models when making decisions.

False

Suppose that each police officer hired by the City of Gotham generates an average benefit to the community of $500 per week, and the average salary of police officers is $600 per week. Should the City of Gotham hire more or fewer police officers?

It's impossible to say. Reason: Whether the City of Gotham should hire more, or fewer police officers depends on the marginal benefit and marginal cost of an additional police officer, but the question only gives information on average benefit and average cost.

In the graph of a straight line, the vertical intercept is the value taken by the:

dependent variable when the independent variable is equal to zero.

When making decisions, people sometimes make mistakes because they Blank______.

fail to consider implicit costs

The marginal cost of carrying out an activity is the

increase in total cost that results from carrying out one additional unit of the activity.

Economists believe that people

never have enough time, money, or energy to do everything or have everything they want.

A principle that predicts how people will behave is called a(n):

positive economic principle.

In economics, a(n) Blank______ individual is someone with well-defined goals who tries to fulfill those goals as best they can.

rational

A normative economic principle Blank______.

says how people should behave

Which of the following costs should be ignored when weighing the costs and benefits of an action? sunk, marginal, opportunity, or variable costs

sunk costs

Economic _____ is the benefit of taking an action minus its cost.

surplus

The economic surplus of an action is

the benefit of taking an action minus its cost.

Economic models are Blank______ if people do not consciously weigh costs and benefits when making decisions.

useful even

In the graph of a straight line, the value taken by the dependent variable when the independent variable is equal to zero is known as the

vertical intercept