ECO 111

If a buyer's willingness to pay for an item is $10, and the buyer purchases the item for $8, what is the buyer's economic surplus?

$2

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

If an employer offers a potential employee $45,000, but the employee would be willing to work for $40,000, and the employer will make $65,000 from the work that the employee does, what is the employee's economic surplus?

$5,000

Deniz produces cups and bowls. Her production possibility frontier for a particular amount of time is displayed below. What is the opportunity cost of producing an additional cup?

2 bowls

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.

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 Angela?

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

Which of these principles, when followed correctly, causes people to avoid making choices that reduce their economic surplus?

The cost-benefit principle

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?

The cost-benefit principle

Why do you need to do more than just calculate whether a financial profit will be made when you are deciding whether to start a new business?

The financial profits need to be at least as large as the opportunity cost of the investment of your time and money.

Which of these should NOT be a factor in a person's decision making?

The framing effect

Which one of these questions best boils down the marginal principal?

The marginal principle

You are considering starting a sandwich shop, but are comparing that to the idea of staying at your current job instead. Which economic principle are you taking into account?

The opportunity cost principle

Which of these would allow a business owner to experiment with hiring more workers until profits are maximized?

The rational rule

Opportunity Cost

True cost of something is the next best alternative you give up to get it (eating double chocolate cliff bar is opportunity cost)

You are willing to spend $4 on a cheeseburger. According to the cost-benefit principle, when should you purchase the cheeseburger?

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

The marginal principle

decisions about quantities are best made incrementally

When a cashier is deciding how many hours to work, the marginal benefit she should consider is _____ and the marginal cost she should consider is _____.

her hourly pay; the value of one hour of leisure time

Economic Surplus

is a measure of how much a decision has improved the decision maker's well-being.

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?

marginal principle

The _____ maps out the different sets of output that are attainable with the available resources.

production possibility frontier

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 two values should a business owner compare before deciding to hire one more worker? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices

Marginal cost and marginal benefit