Econ Chap1

156. When faced with a quantity decision, the economic surplus is always maximized by following the: a. Rational Rule. b. framing effect. c. opportunity cost principle. d. interdependence principle.

a

157. The cost of your favorite coffee is $6.50 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ of coffee. a. $6.50; one cup b. $0; five cups c. $1; six cups d. $1; five cups

a

184. Dependencies between your own choices reflect the fact that: a. you have limited resources. b. society has limited resources. c. resources are spread across varying markets. d. resources can be spread across time.

a

138. The _____ suggests, decisions about quantities are best made incrementally. a. cost-benefit principle b. opportunity cost principle c. marginal principle d. interdependence principle

c

150. The Rational Rule suggests you should continue with an activity until your _____ benefit _____ your marginal cost. a. total; equals b. total; exceeds c. marginal; equals d. marginal; is less than

c

10. You are on the marketing team for Kraft. Knowing that most people base their decisions on how things are described, your team must determine the best language to entice people to buy Kraft cheese. Your team is choosing between describing the package content as containing "5% fat" or as "95% fat-free." What is the term for why most people would react differently to the two phrases? a. framing effect b. cost-benefit analysis c. willingness to pay d. economic surplus

a

117. The opportunity costs of attending college includes the: a. cost of tuition. b. cost of room and board. c. cost of clothes to wear at school. d. time spent studying.

a

1. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A keeps one location open with certainty. Plan B has a one-in-three chance of saving all three locations but a two-in-three chance of saving no locations. The second consultant also offers two plans. Plan C will result in losing two locations with certainty. Plan D has a two-in-three chance of losing all locations but a one-in-three chance of losing no locations. If the franchisee chooses Plan A, she should also choose Plan: a. No plan results in the same outcome as Plan A. b. B. c. C. d. D.

c

115. Decisions should reflect the _____ costs, rather than just the _____ costs. a. financial; marginal b. opportunity; nonfinancial c. opportunity; financial d. nonfinancial; financial

c

99. Gary is willing to pay $700 for a new iPad. The Apple Store is selling a new iPad for $600. It costs Apple $400 to produce this iPad. How much economic surplus does Apple receive if Gary purchases this iPad? a. $700 b. $600 c. $200 d. $100

c

175. The interdependence principle states that your best choice today depends on all of these EXCEPT: a. past decisions you have made. b. expectations about the future. c. other decisions you are currently making. d. decisions others are currently making.

a

51. We have to make choices because: a. we have unlimited income and must decide what to purchase. b. the resources available to us are limited. c. the resources we would like to use in production are infinite. d. with good planning, trade-offs can be avoided.

b

186. Dependencies between markets reflect the fact that: a. you have limited resources. b. society has limited resources. c. resources are spread across different markets. d. resources can be used across time.

c

48. _____ forces us to make choices. a. Opportunity cost b. Marginal decision making c. Scarcity d. Market failure

c

116. Opportunity cost arises from the fundamental economic problem of: a. interdependence. b. marginal costs. c. unlimited resources. d. scarcity.

d

76. The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of: a. inefficiency. b. equilibrium. c. inequity. d. scarcity.

d

54. Whenever a good is purchased: a. the cost of the good is its opportunity cost. b. the cost of the good is easy to measure in terms of the price paid for it. c. overall efficiency increases. d. scarcity will increasingly constrain the future availability of the good.

a

72. In Douglas County, Washington, apple production is limited by the number of acres available for agricultural production. Which economic concept does this statement BEST represent? a. scarcity b. marginal analysis c. equilibrium d. opportunity cost

a

103. Juan is willing to pay $650 for a new iPad. He offers to pay $600 for an iPad at the Apple store. It costs Apple $700 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____ would be better off due to the transaction. a. will; neither Juan nor Apple b. will; both Juan and Apple c. will not; only Juan d. will not; only Apple

c

2. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to four of his least profitable locations. He meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A will result in losing two locations with certainty. Plan B has a three-in-four chance of losing all locations but a one-in-four chance of losing no locations. The second consultant also offers two plans. Plan C keeps two locations open with certainty. Plan D has a one-in-four chance of saving all four locations but a three in-four chance of saving no locations. If the franchisee chooses Plan B, he should also choose Plan: a. No plan results in the same outcome as Plan B. b. B. c. C. d. D.

d

189. The order in which you should apply the four core principles of economics is the: a. cost-benefit principle, the opportunity cost principle, the marginal principle, the interdependence principle. b. interdependence principle, the opportunity cost principle, the cost-benefit principle, the interdependence principle. c. opportunity cost principle, the marginal principle, the cost-benefit principle, the interdependence principle. d. marginal principle, the cost-benefit principle, the opportunity cost principle, the interdependence principle.

d 190. Asking "One more?" allows the _____ principle to be analyzed as a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence ANSWER: c

79. The cost-benefit principle states that a decision should be pursued only if the: a. benefits are greater than the costs. b. costs are greater than the benefits. c. benefits are positive. d. costs are negative.

a

120. Jonathan is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of dinner at a fancy restaurant on the way to the concert is _____ in the calculation of his opportunity cost and represents a _____ cost. a. included; financial b. included; nonfinancial c. not included; financial d. not included; sunk

a

124. Sunk costs are costs that are incurred: a. regardless of which decision is made. b. if a particular decision is made. c. if a particular decision is not made. d. only for some decisions.

a

139. The marginal principle says that decisions about quantities are best made: a. incrementally. b. arbitrarily. c. all at once. d. in total.

a

195. Consider the decision to read your economics textbook regularly. Which of the four core principles of economics applies to the notion that reading this textbook will require time and effort but that doing so will improve your grade in this course? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

a

200. Consider your decision to attend class in college or skip it. Which of the four core principles of economics applies to the notion that attending class today will require you to give up time and energy to pay attention, but in doing so you will gain a better understanding of the material? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

a

36. Netflix canceled its original series Ozark after season 4, indicating that Netflix determined producing season: a. 5 was not worth the marginal cost. b. 2 was not worth the marginal cost. c. 6 was a sunk cost. d. 5 was a sunk cost.

a

104. Juan is willing to pay $900 for a new iPad. He offers to pay $800 for an iPad at the Apple store. It costs Apple $700 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____ would be better off due to the transaction. a. will; neither Juan nor Apple b. will; both Juan and Apple c. will not; only Juan d. will not; only Apple

b

108. According to the cost-benefit principle, framing effects—or how a choice is described—should: a. affect a decision. b. not affect a decision. c. be considered costs. d. be considered benefits.

b

167. Sarah is a coffee farmer trying to decide how many tons of coffee to produce. She can sell each ton of coffee for $3,000. The cost of producing her first ton of coffee is $600, and the second ton costs $1,200. Each additional ton of coffee costs $600 more to produce. How many tons of coffee should Sarah produce, and what is the total cost of her coffee production? a. She will produce three tons at a total cost of $3,600. b. She will produce four tons at a total cost of $6,000. c. She will produce five tons at a total cost of $9,000. d. She will produce six tons at a total cost of $12,600.

c

169. Vincent makes handcrafted dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $2,000. The cost of the first table is $750, and for the second it's $1,000. For each additional table he produces, the marginal cost of each table increases by $250. How many dining tables should Vincent produce, and what is the total cost of his production? a. He will produce four tables at a cost of $4,500. b. He will produce five tables at a cost of $6,250. c. He will produce six tables at a cost of $8,250. d. He will produce seven tables at a cost of $10,500.

c

141. The marginal cost of an additional worker is: a. always equal to the cost from the first worker hired. b. always equal to the benefit of hiring the additional worker. c. the total cost of all workers hired. d. the additional cost of hiring one more worker.

d

154. To maximize economic surplus, keep increasing output as long as: a. total benefits equal total costs. b. total benefits exceed total costs. c. marginal benefits equal marginal costs. d. marginal benefits exceed marginal costs.

d

82. Estimating willingness to pay quantifies _____ costs or benefits associated with a choice. a. financial b. nonfinancial c. opportunity d. marginal

b

83. _____ is assessed by asking: "What is the _____ I am willing to pay to get this benefit, or avoid that cost?" a. Willingness to pay; least b. Willingness to pay; most c. Opportunity cost; least d. Opportunity cost; most

b

94. Kevin goes to a local coffee shop and orders a medium-sized latte. He is willing to pay $6 for it. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte? a. $6 b. $4 c. $2 d. $1

b

96. Amanda goes to a local café and orders a sandwich. She is willing to pay $10 for it. The price of the sandwich is $4. The cost to the café to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich? a. $10 b. $6 c. $4 d. $3

b

11. When you're shopping at Target, you notice a sign in large bold letters that reads, "Free $5 gift card." Deciphering the fine print, you determine that you would have to spend $60 on laundry detergent to receive the gift card. Which term explains why Target puts the word "Free" in large bold letters? a. framing effect b. cost-benefit analysis c. willingness to pay d. economic surplus

a

12. You just got a new puppy, and you need to determine the best way to have him cared for while you are at work. You could enroll your puppy in a doggy daycare in your neighborhood for $22 per day. Alternatively, your friend, who works from home, could care for your puppy for only $10 per day. However, your friend lives a few miles away, so it would cost you $6 per day in gas and $10 per day in time to drop your puppy off and pick him up. If you choose to take your puppy to daycare, are you correctly applying the cost-benefit principle? a. Yes, because you are maximizing your economic surplus by enrolling him in daycare. Copyright Macmillan Learning. Powered by Cognero. Page 3 Name: Class: Date: Chapter 1 b. Yes, because you are maximizing your willingness to pay by paying $22 per day. c. No, because your economic surplus would be higher if you only paid $10 per day. d. No, because your costs would be lower if you choose your friend's house.

a

13. You just got a new puppy, and you need to determine the best way to have her cared for while you are at work. You could enroll your puppy in a doggy daycare in your neighborhood for $24 per day. Alternatively, your friend, who works from home, could care for your puppy for only $10 per day. However, your friend lives a few miles away, so it would cost you $6 per day in gas and $12 per day in time to drop your puppy off and pick her up. If you choose to take your puppy to daycare, what is your economic surplus? a. $4 b. $14 c. $24 d. $18

a

22. Blake has successfully launched a massage therapy business, but he now receives more booking requests than he can accommodate. How should Blake proceed in growing his business? He should experiment by hiring: a. one more massage therapist to determine if the marginal benefit is greater than the marginal cost. b. one more massage therapist to determine if the total benefit is greater than the total cost. c. three more massage therapists to determine if the marginal benefit is greater than marginal cost. d. three more massage therapists to determine if the total benefit is greater than the total cost.

a

92. How is the economic surplus generated by a decision calculated? a. It is the total benefits minus total costs arising from the decision. b. It is the total benefits plus total costs arising from the decision. c. It is the sum of benefits arising from the decision. d. It is the sum of costs arising from the decision.

a

20. A social media influencer is quickly gaining followers, and he's offered his first brand deals. Each deal offers a $175 payment. In exchange, the influencer must advertise the brand by creating posts and responding to comments. To have time for each deal, the influencer must give up additional time working at his primary job. For the first brand deal, his total foregone earnings are $150. For the second and third brand deals, his total foregone earnings are $375 and $675, respectively. How many brand deals should he accept? a. zero b. one c. two d. three

b

49. There are many freshwater lakes in the United States. However, freshwater is scarce because: a. it has no alternative uses. b. there is not enough of it to meet all needs. Copyright Macmillan Learning. Powered by Cognero. Page 22 Name: Class: Date: Chapter 1 c. the government limits its use through regulations. d. it has a high opportunity cost.

b

106. Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying the car and offers Ivan $55,000 for the car. Samantha is willing to pay up to $60,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a. occurs; both Ivan and Samantha receive b. occurs; only Ivan receives c. does not occur; only Samantha receives d. does not occur; neither Ivan nor Samantha receives

c

17. An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $1,500 each per month. Additional operating costs, including rent and utilities, will be $5,000 per month at each location. The investor projects that after the business gains traction, the first location will have 1,100 members. The second location will bring in 900 members. The third and fourth locations will bring in 400 and 200 members, respectively. The monthly membership fee will be $50 per member. How many locations should the investor franchise? a. one b. two c. three d. four

c

80. The cost-benefit principle states that the full set of _____ should be evaluated when making any choice. a. opportunity costs b. economic surpluses c. costs and benefits d. interdependencies

c

84. Economists use money equivalents to compare costs and benefits because money is: a. critical to keeping an economy working smoothly. b. what is used to measure opportunity costs. c. a common measuring stick. d. what economic agents are trying to maximize.

c

89. Nerida is thinking of buying a new car to avoid taking the bus to work. Each of these is a cost she should consider when using the cost-benefit principle to evaluate this decision EXCEPT: a. parking. b. car insurance. c. bus fare. d. repairs.

c

59. A new Subway location has offered a prize—a free meal (valued at $5) each week for a year—to its first 100 customers on opening day. Isabella camped out for 48 hours before the opening to be one of the first 100 customers and successfully obtained the prize. The cost to Isabella of obtaining the "free meal a week for a year" prize was: a. zero, since it was free. b. $260—the amount that would have to be paid if it were not free. c. whatever else she would have done with the 48 hours. d. the amount that would have to be paid if it were not free plus whatever else she would have done with the 48 hours.

c 60. King Taco charges the same price for everything on its menu: $5 will buy a taco, a burrito, or nachos. You buy the burrito and think that if you had not purchased the burrito, you would have purchased the taco. The opportunity cost of the burrito is: a. $5. b. your forgone enjoyment of the taco. c. $5 and your forgone enjoyment of the taco. d. $5 and your forgone enjoyment of the taco and the nachos. ANSWER: b

101. Juan is willing to pay $600 for a new iPad. Apple is selling its new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____ would be better off due to the transaction. a. will; neither Juan nor Apple b. will; both Juan and Apple c. will not; only Juan d. will not; only Apple

d

27. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring efficient management of costs. At one manufacturing plant, if Nissan devotes all of its resources to manufacturing sedans, it can produce 480,000 sedans per year. If Nissan devotes all of its resources to manufacturing trucks, it can produce 240,000 trucks per year. What is Nissan's opportunity cost of producing one truck at this manufacturing plant? a. half truck b. two trucks c. half sedan d. two sedans

d

77. A trade-off involves weighing: a. social costs. b. private costs. c. external costs. d. costs and benefits.

d

105. Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $50,000. He decides that he might be willing to sell it, so he posts it on Craigslist for $55,000. Samantha is interested and willing to pay up to $72,000 for such a car. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a. occurs; both Ivan and Samantha receive b. occurs; only Samantha receives c. does not occur; only Ivan receives d. does not occur; neither Ivan nor Samantha receives

a

114. The opportunity cost principle states that the true cost of something is the: a. next best alternative you have to give up to get it. b. least desired alternative you have to give up to get it. c. economic surplus you give up to get it. d. economic surplus you receive from getting it.

a

102. Juan is willing to pay $800 for a new iPad. Apple is selling its new iPad for $700. It costs Apple $400 to produce this iPad. A voluntary economic transaction between Juan and Apple _____ occur because _____would be better off due to the transaction. a. will; neither Juan nor Apple b. will; both Juan and Apple c. will not; only Juan d. will not; only Apple

b

113. Which principle tells you that the true cost of something is the next best alternative you have to give up to get it? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

b

121. Jonathan is deciding whether to study for his economics exam at a café down the street or go to a concert a few cities over. The time spent commuting to the concert is _____ in his opportunity cost calculations and represents a _____ cost. a. included; financial b. included; nonfinancial c. not included; financial d. not included; sunk

b

129. Carolyn is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user may face. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should consider all of these costs when calculating the opportunity costs of leaving college EXCEPT the: a. potential future job security from her college degree. b. 90 credit hours she has already completed for her degree. c. potential memories from her senior year of college. d. skills she may gain from her final year of economics courses.

b

122. Jonathan is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of tuition for his economics course is _____ in his opportunity cost calculations for this decision and represents a _____ cost. a. included; financial b. included; nonfinancial c. not included; financial d. not included; sunk

d

193. Asking "What else?" allows the _____ principle to be boiled down to a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

d

118. The opportunity costs of attending college include the: a. potential income that could be earned working. b. cost of a spring-break trip. c. cost of clothes to wear at school. d. effort and hard work.

a

192. Asking "Or what?" allows the _____ principle to be analyzed as a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

b

112. It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but due to the weather the surcharge is triple the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost. a. walk; less b. walk; more c. take an Uber; less d. take an Uber; more

a

199. Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that by attending class you are not doing the next best activity you would prefer to do, such as napping or going to the gym? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

b

64. A friend comes up to you and offers you a free ticket to a Dodgers game that night, and you decide to attend the game. The game takes five hours and costs you $25 for transportation. If you had not attended the game, you would have worked at your part-time job for $12 an hour. What is the cost to you of attending the game? a. The cost is zero—the ticket is free. b. $85 c. $60 d. $55

b

109. You are considering whether you should go out to dinner at a restaurant with your friend. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $15. You value the restaurant meal at $30 and the time spent with your friend at $50. You should _____ to dinner with your friend because the benefit of doing so is _____ than the cost. a. go; greater b. go; less c. not go; greater d. not go; less

a

132. Alan is a college student living alone in a campus apartment. He finished cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now must decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Alan should consider all these costs when making this decision EXCEPT the: a. time he spent cooking the dinner. b. time it will take to walk, meet his friends, and walk back. c. amount of money he will spend at the dining hall. d. value he places on eating dinner with his friends.

a

137. You have paid $100 for student season tickets to the football games at your university. It is halfway through the season, and the team has not won any games. You are considering whether you will attend any future games this season. All of these are costs or benefits you should consider when making this decision EXCEPT the: a. $100 you spent on the season tickets. b. time spent to go to the game instead of studying. c. satisfaction you will get if your team wins a game. d. $5 you can make per game by selling your remaining tickets.

a

140. The marginal benefit from an additional worker is: Copyright Macmillan Learning. Powered by Cognero. Page 40 Name: Class: Date: Chapter 1 a. the additional benefit from hiring one more worker. b. the total benefit from all workers hired. c. always equal to the benefit from the first worker hired. d. always equal to the cost of hiring the additional worker.

a

142. Joshua is planning on studying late into the night for his economics exam. He is contemplating how many cups of coffee to buy tonight. Joshua should keep buying coffee throughout the evening until the marginal: a. benefit of purchasing one more coffee equals the marginal cost. b. benefit of purchasing one more coffee is less than the marginal cost. c. benefit of purchasing one more coffee is positive. d. cost of purchasing one more coffee is positive.

a

144. Kathleen is binge-watching her favorite show on Netflix. She is attempting to decide how many more episodes to watch. Kathleen should continue watching episodes as long as the marginal: a. benefit of watching another episode exceeds the marginal cost. b. benefit of watching another episode is less than the marginal cost. c. benefit of watching another episode is positive. d. cost of watching another episode is positive.

a

147. When evaluating how much to produce, increase the quantity produced if the marginal benefit of an additional item is _____ the marginal cost of the additional item. a. greater than or equal to b. equal to c. less than or equal to d. less than

a

148. The marginal principle breaks quantity decisions into iterative decisions that use the: a. cost-benefit principle. b. opportunity cost principle. c. interdependence principle. d. sunk cost evaluation.

a

149. The Rational Rule summarizes the marginal principle. It says that if something is worth doing, keep doing it until your marginal: a. benefits equal your marginal costs. b. benefits exceed your marginal costs. c. benefits are zero. d. costs are less than your marginal benefits.

a

158. The cost of your favorite coffee is $5 per cup at the coffee shop. The marginal cost of each cup you drink is _____. The first cup of coffee you drink gives you a marginal benefit of $8. The marginal benefit from the second cup is $6, $4 from the third, $2 from the fourth, and $0 from the fifth. You should drink _____ cups of coffee. a. $5; two b. $0; three c. $2; five d. $2; three

a

176. Diane is a student studying economics and currently working on her class schedule for next semester. When she considers taking another economics course rather than taking a math class in the same time slot, she is acknowledging that dependencies exist: a. between her own choices. b. between people or businesses in the same market. c. between markets. d. through time.

a

180. Harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics course to help with this decision. By considering that he cannot be both a petroleum engineer and a rollercoaster designer, he is acknowledging the dependencies that exist: a. between his own choices. b. between people or businesses in the same market. c. between markets. d. through time.

a

191. Asking "Benefit beat cost?" allows the _____ principle to be boiled down to a simple question. a. cost-benefit b. opportunity cost c. marginal d. interdependence

a

24. You're ready to launch your first ad campaign to attract new customers to your small business. You consider hiring an ad agency to launch the campaign because you have no background in marketing. However, you discover a YouTube channel of a marketing expert who teaches small businesses how to create and launch their own marketing campaigns. You learn so much from this channel that you decide to do it yourself. Since you follow the Rational Rule, which of these statements explains how the interdependency between markets changes your choice? a. You earn more surplus by doing it yourself now that you understand more about marketing. b. You earn less surplus by doing it yourself now. c. You would have been better off hiring the professional and you misused the framing effect in your decision. d. You earn more surplus by using the professional now that you understand more about marketing.

a

25. An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $1,500 per month each. Additional operating costs, including rent and utilities, will be $5,000 per month at each location. The investor projects that after the business gains traction, the first location will have 1,100 members. The second location will bring in 900 members. The third and fourth locations will bring in 400 and 200 members, respectively. The monthly membership fee will be $50 per member. However, looking at the most recent population data, the investor learns that the city's population growth rate is declining. This change in expectations about the future decreases their membership forecast by 200 members for each potential location. How does this change in expectations change the investor's franchising decision? a. They will franchise two locations instead of three. b. They will franchise one location instead of two. c. They will franchise the same number of locations. d. The data would not impact the investor's decision.

a

26. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring efficient management of costs. At one manufacturing plant, if Nissan devotes all of its resources to manufacturing sedans, it can produce 480,000 sedans per year. If Nissan devotes all of its resources to manufacturing trucks, it can produce 240,000 trucks per year. What is Nissan's opportunity cost of producing one sedan at this manufacturing plant? a. half truck b. two trucks c. half sedan d. two sedans

a

3. International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all locations but a one-in-three chance of losing no locations. The second consultant also offers two plans. Plan C keeps one location open with certainty. Plan D has a one-in-three chance of saving all three locations but a two in-three chance of saving no locations. If the franchisee applies the cost-benefit principle, which combination of plans reflects a consistent decision? a. Plan C and Plan A b. Plan B and Plan A c. Plan D and Plan A d. Plan C and Plan B

a

33. Samsung Electronics uses its resources to produce tablet computers and cell phones. The _____ of manufacturing more phones is manufacturing fewer tablets, which Samsung can illustrate with its _____. a. opportunity cost; production possibility frontier b. marginal benefit; willingness to pay c. productivity; production possibility frontier d. opportunity cost; voluntary exchange

a

37. According to Insider, the pilot episode of HBO's original series Westworld cost $25 million. Using the Rational Rule, HBO's analysts predicted that the future revenue from subscriptions, advertising, and licensing because of Westworld would be: a. greater than $25 million plus the production cost of subsequent episodes. b. less than $25 million more than the cost of subsequent episodes. c. less than HBO's next best alternative. d. less than HBO's cost of production.

a

38. Your aunt tells you that although she has been in the same career for multiple years, she really doesn't enjoy it. Instead of her bachelor's degree, she always wished she had pursued vocational training instead. She thinks she should definitely keep her job since she paid $24,000 for tuition. The cost of vocational training would be $10,000. Your advice to her is that she should: a. consider the $24,000 a sunk cost and unrelated to her choice of vocational training. b. include the $10,000 in her estimation of sunk costs. c. pursue the vocational training only if she is willing to pay $34,000 for her education. d. continue her current line of work since she already paid for it.

a

39. A doctor has worked as a general practitioner for several years, earning an annual salary of $125,000. They are now deciding whether they want to open their own private practice or continue as a team member in the existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice, they will receive $50,000 in salary from the business annually until the practice is well-established. They anticipate the practice will take one year to become fully established. They paid $200,000 for medical school. They should open their own practice if the future benefits exceed: a. $175,000. b. $200,000. c. $375,000. d. $75,000.

a

4. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,000 for the entire campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill. You'll also pay an employee $340 per month to work some of the hours you normally work while you manage the campaign. Would it be better to hire a professional rather than doing the campaign yourself? a. Yes, because your economic surplus is $220. b. Yes, because your full set of costs is only $540. c. No, because the benefit of not having to do it yourself is greater than the cost of the professional. d. No, because you can increase your economic surplus if you do it yourself.

a

40. A doctor has worked as a general practitioner for several years, earning an annual salary of $150,000. They are now deciding whether they want to open their own private practice or continue as a team member in the existing office. One-time start-up costs for the practice would be $100,000. If they open their own practice, they will receive a salary of $50,000 from the business annually until the practice is well-established. They anticipate the practice will take two years to become fully established. They paid $200,000 for medical school. They should open their own practice if the future benefits exceed: a. $300,000. b. $200,000. c. $500,000. d. $400,000.

a

42. You just finished your doctorate in economics and have received two different job offers. The first is a position as an assistant professor, which will require you to move to a location you consider undesirable. You value living in one of your favorite cities at $20,000 per year. The second offer pays $10,000 a year more to work remotely as an economist for a private company. You have $40,000 in student loan debt. You should only accept the job as a professor if you have benefits that outweigh your opportunity cost of: a. $30,000 per year. b. $10,000 per year. c. $40,000 per year. d. $20,000 per year.

a

43. You just finished your doctorate in economics and have received two different job offers. The first is a position as an assistant professor, which will require you to move to a location you consider undesirable. You value living in one of your favorite cities at $10,000 per year. The second offer pays $20,000 a year more to work remotely as an economist for a private company. You have $40,000 in student loan debt. You should only accept the job as a professor if you have benefits that outweigh your opportunity cost of: a. $30,000 per year. b. $10,000 per year. c. $40,000 per year. d. $20,000 per year.

a

50. The problem of determining what goods and services society should produce: a. exists because we can produce any amount of a good we need or want, making choice difficult. b. exists because there are not enough resources to provide all the goods and services that people want. c. would not exist if all levels of government would agree to supply goods and services to those who do not have enough. d. would not exist if a central planning bureau were to decide how to allocate resources.

b

44. Jeni is deciding the direction she wants to take her business, Jeni's Ice Cream, over the course of the next year. She could develop a new flavor of ice cream to sell in grocery stores, or she could open a new company owned location. The cost of research, development, and bringing the new flavor to market would be $200,000. Copyright Macmillan Learning. Powered by Cognero. Page 21 Name: Class: Date: Chapter 1 Jeni spent $75,000 developing the last new flavor profile, which was unsuccessful. If she doesn't develop the new flavor, the start-up cost for the new store location would be $50,000. Over the course of the next year, operating costs for already existing locations will be $100,000. What is Jeni's opportunity cost of developing a new ice cream flavor? a. $150,000 b. $100,000 c. $200,000 d. $75,000

a

45. Scarcity occurs in everyday life because: a. resources are limited. b. the wants of individual consumers are limited. c. there are poor people even in rich countries. d. taxes keep prices higher than they would otherwise be.

a

46. If resources are scarce: a. they are insufficient to provide enough goods and services to satisfy all human material wants and needs. b. there are not enough of them for firms to produce goods and services. c. they are probably overvalued by consumers. d. their supply is unlimited.

a

5. You are a small business owner preparing to launch your first ad campaign to attract new customers, and must decide whether to learn about advertising yourself or hire a professional to launch the campaign. The campaign will last three months. If you hire a professional, you'll have to pay them a lump sum of $1,200 for the entire campaign. But if you decide to do it yourself, you'll take a course that costs $200 to introduce you to the skill. You'll also pay an employee $320 per month to work some of the hours you normally work, while you manage the campaign. If you hire the professional, your total benefit would be all the money you avoid spending on doing the campaign yourself. What is the total benefit of hiring the professional? a. $1,160 b. $200 c. $320 d. $960

a

7. You are a math tutor, and you offer in-home tutoring on weekday afternoons for $20 an hour. On Saturdays, you tutor students hourly for free at the community center. Since you follow the Rational Rule for Consumers, which statement can you conclude is TRUE? a. Your economic surplus rises or at least remains unchanged when you tutor at the community center. b. You couldn't gain any economic surplus from tutoring at the community center since you earn $0 per hour. c. You can't compare the two types of tutoring because you can't quantify how much donating your time means to you. d. The time you spend tutoring the students on weekday afternoons lowers your economic surplus.

a

73. You like to read GQ (Gentlemen's Quarterly) and Golf Digest. You have only $6 to spend and can buy only one magazine, so you buy only Golf Digest. Which economic concept does this statement BEST represent? a. scarcity b. equilibrium c. the marginal principle d. specialization

a

74. Samsung finds it difficult to hire enough skilled software engineers to program the popular Galaxy cell phone. Which economic concept does this statement BEST represent? a. scarcity b. specialization c. ceteris paribus d. trade-off

a

75. In California, there has been a drought, and rural communities are fighting with urban areas over water. Which economic concept does this statement BEST represent? a. scarcity b. specialization c. incentives d. equilibrium

a

78. The cost-benefit principle states that _____ are the incentives that shape decisions. a. costs and benefits b. incomes c. opportunity costs d. framing effects

a

85. The key to using the cost-benefit principle is to think about _____ aspects of a decision. a. both financial and nonfinancial b. only financial c. only nonfinancial d. neither financial nor nonfinancial

a

86. The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations quantify _____ costs and benefits. a. both monetary and nonmonetary; only nonmonetary b. only monetary; both monetary and nonmonetary c. only nonmonetary; only monetary d. both monetary and nonmonetary; only monetary

a

87. Nerida could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a. less; $150 b. less; $75 c. greater; $150 d. greater; $75

a

88. Nerida can either commute to work using a bus or purchase a new car. The bus fare each way is $2. Nerida works five days a week for 50 weeks a year. Based solely on the benefit of avoiding the cost of her bus tickets, Nerida should purchase a car if the cost of the car is _____ than _____ per week. a. less; $20 b. less; $10 c. greater; $20 d. greater; $10

a

9. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up specials. Which statement can you conclude is FALSE? a. The transaction lowered the comedian's economic surplus. b. The deal was a voluntary exchange between Netflix and the comedian. c. For Netflix, the cost of the deal was no greater than the benefits of the deal. d. The benefits of the deal were at least equal to the cost for the comedian.

a

91. The cost-benefit principle will lead you to make unselfish decisions if you: a. account for unselfish motivations. b. maximize monetary costs and benefits. c. pursue only decisions for which the benefits outweigh the costs. d. maximize economic surplus.

a

55. You can spend $300 on either a pair of new Air Jordan sneakers or a new skateboard. If you choose to buy the Air Jordans, the opportunity cost is: a. $300. b. your enjoyment of the new skateboard. c. both the $300 and your enjoyment of the new skateboard. d. impossible to determine.

b

15. You just moved into your new apartment, which has washer and dryer hookups, but your apartment complex doesn't provide washers and dryers. You don't want to go to a laundromat. You can rent a washer and dryer set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,100, which you could sell after one year for $700, or $600 after two years. Should you buy or rent the set? Choose the correct statement. a. If you plan to stay in the apartment for one year, you should rent the set to earn $40 worth of economic surplus. b. If you plan to stay in the apartment for one year, you should buy the set to earn $40 worth of economic surplus. c. If you plan to stay in the apartment for two years, you should rent the set to earn $220 worth of economic surplus. d. If you plan to stay in the apartment for two years, you should buy the set to earn $500 worth of economic surplus.

a 16. You just moved into your new apartment, which has washer and dryer hookups, but your apartment complex doesn't provide washers and dryers. You don't want to go to a laundromat. You can rent a washer and dryer set from an appliance rental company for $30 per month. Alternatively, you could buy a set for $1,100, which you could sell after one year for $700, or $600 after two years. You plan to stay in this apartment for two years, since it's near your job. Should you buy or rent the set? a. You should rent the set because renting earns $40 worth of economic surplus. b. You should rent the set because renting earns $400 worth of economic surplus. c. You should buy the set because buying earns $220 worth of economic surplus. d. You should buy the set because buying earns $500 worth of economic surplus. ANSWER: c

134. You are thinking of starting a tutoring service. You already have a part-time job on campus that pays $10 per hour. You think you can tutor fellow students for five hours each Saturday at $25 per hour. If you were not tutoring, you could work another five hours at your campus job. How much economic surplus will you generate each week if you start tutoring? a. $125 b. $75 c. $65 d. $50

b

143. Joshua is planning on studying late into the night for his economics exam. He is contemplating how many cups of coffee to buy tonight. Joshua should NOT buy an additional coffee during the evening if the marginal: a. benefit of purchasing one more coffee exceeds the marginal cost. b. benefit of purchasing one more coffee is less than the marginal cost. c. benefit of purchasing one more coffee is positive. d. cost of purchasing one more coffee is positive.

b

145. Kathleen is binge-watching her favorite show on Netflix. She is trying to decide how many more episodes to watch. Kathleen should continue watching episodes until the marginal: a. benefit of watching another episode exceeds the marginal cost. b. benefit of watching another episode is equal to the marginal cost. c. benefit of watching another episode is positive. d. cost of watching another episode is positive.

b

146. According to the marginal principle, keep increasing quantity until the marginal benefit of an additional item is _____ the marginal cost of an additional item. a. greater than b. equal to c. less than d. greater than or less than

b

151. Ron is buying jeans online and has to decide how many to buy. He should buy an additional pair if the: a. marginal benefit of the next pair is less than the price of the jeans. b. marginal benefit of the next pair is at least as high as the price of the jeans. c. total benefit when purchasing one more pair is less than the total cost of the jeans. d. total benefit when purchasing one more pair is at least as high as the total cost of the jeans.

b

152. Taryn is buying shirts online and has to decide how many shirts to buy. She should buy another shirt if the: a. marginal benefit of the next shirt is less than the price of the shirt. b. marginal benefit of the next shirt is at least as high as the price of the shirt. c. total benefit when purchasing one more shirt is less than the total cost of the shirts. d. total benefit when purchasing one more shirt is at least as high as the total cost of the shirts.

b

159. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $500 per day. If she hires another worker, she can make another $400 per day. The marginal benefit of hiring another worker decreases by $100 with each additional hire. Assuming that workers are paid $15 per hour and work eight hours, how many employees should Marie hire, and what will the total revenue of her store be? a. She will hire three workers and the revenue of the store will be $1,200. b. She will hire four workers and the revenue of the store will be $1,400. c. She will hire five workers and the revenue of the store will be $1,400. d. She will hire six workers and the revenue of the store will be $1,500.

b

160. Marie is a manager at an electronics store, and she has to decide how many workers to hire. If she hires one worker, her revenue is $400 per day. If she hires another worker, she can make another $350 per day. The marginal benefit of hiring another worker decreases by $50 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be the total revenue of her store? a. She will hire four workers and the revenue of the store will be $1,300. b. She will hire five workers and the revenue of the store will be $1,500. c. She will hire six workers and the revenue of the store will be $1,650. d. She will hire seven workers and the revenue of the store will be $1,750.

b

164. Charles is a manager at a coffee shop and is making hiring decisions. With one worker, he can make 15 drinks that sell for $3 on average in a single hour. With a second worker, he can make an additional 12 drinks in a single hour. The marginal benefit of each additional worker decreases by three drinks with each additional hire. Assuming that workers are paid $12 per hour and work eight hours, how many employees should Charles hire for each hour? a. three b. four c. five d. six

b

165. Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can make 20 drinks that sell for $4 on average in one hour. A second worker can make another 16 drinks in one hour. The marginal benefit of each additional worker decreases by four drinks with each additional hire. Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles hire for each hour? a. four b. five c. six d. seven

b

166. Sarah is a coffee farmer trying to decide how many tons of coffee to produce. She can sell each ton of coffee for $2,500. The cost of producing the first ton of coffee is $500, for the second ton, it's $1,000. For each additional ton of coffee produced, the marginal cost increases by $500. How many tons of coffee should Sarah produce, and what is the total cost of her coffee production? a. She will produce four tons at a total cost of $5,000. b. She will produce five tons at a total cost of $7,500. c. She will produce six tons at a total cost of $10,500. d. She will produce seven tons at a total cost of $14,000.

b

168. Sarah is a coffee farmer trying to decide how many tons of coffee to produce. She can sell each ton of coffee for $1,500. The cost of producing her first ton of coffee is $300, and the second ton costs $500. Each additional ton of coffee costs $200 more to produce. How many tons of coffee should Sarah produce, and what is the total cost of her coffee production? a. She will produce six tons at a total cost of $4,800. b. She will produce seven tons at a total cost of $6,300. c. She will produce eight tons at a total cost of $8,000. d. She will produce nine tons at a total cost of $9,900.

b

170. Vincent makes handcrafted dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $3,000. The cost of the first table is $1,000, for the second it's $1,500. For each additional table he produces, the marginal cost of each table increases by $500. How many dining tables should Vincent produce, and what is the total cost of his production? a. He will produce four tables at a cost of $12,000. b. He will produce five tables at a cost of $10,000. c. He will produce six tables at a cost of $13,500. d. He will produce seven tables at a cost of $17,500.

b

171. Vincent makes handcrafted dining tables, and he is trying to decide how many tables to produce. He can sell each dining table for $1,000. The cost of the first table is $900, for the second it's $1,100. For each additional table he produces, the marginal cost of each table increases by $200. How many dining tables should Vincent produce, and what is the total cost of his production? a. Vincent will not make any tables. b. He will produce one table at a cost of $900. c. He will produce two tables at a cost of $2,000. d. He will produce three tables at a cost of $3,300.

b

172. The price of coffee at a local coffee shop is $3. Cheryl is willing to pay $6 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase? a. one b. two c. three d. four

b

178. Diane is a student studying economics and is currently working on her class schedule for next semester. When she considers the fact that a popular class may fill up if she does not act quickly, she is acknowledging the dependencies that exist: a. between her own choices. b. between people or businesses in the same market. c. between markets. d. over time.

b

183. Harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or to design rollercoasters. He is using concepts from his economics course to help with this decision. He thinks many engineers would prefer to design rollercoasters and expects a lower salary in this field. With this analysis, he is acknowledging the dependencies that exist: a. between his own choices. b. between people or businesses in the same market. c. between markets. d. through time.

b

185. Dependencies between various people's choices reflect the fact that: a. you have limited resources. b. society has limited resources. c. resources are spread across different markets. d. resources can be used across time.

b

196. Consider the decision to read your economics textbook. Which of the four core principles of economics applies to the notion that instead of reading this textbook you could be studying for your upcoming exam in a different course? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

b

61. For an economist, the cost of a good is: a. the dollar amount of money you paid to get it. b. what you gave up to get it. c. always equal to the true market value of the good. d. the quantity of resources used to produce it.

b

65. A university student faces the difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $10; she could work at the college library at a wage of $12; or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to: a. $6. b. $12. c. $18. d. $0.

b

68. The marginal principle helps individuals decide: a. whether to live on the margins of society. b. whether to do a bit more of an activity or a bit less of it. c. whether to attend a university or not. d. how large a down payment to make when buying a new house.

b

70. Which statement is TRUE according to standard economic theory? a. Resources are scarce when they can satisfy everyone's wants. b. The true cost of a choice is what you must give up when choosing between alternatives. c. People typically do not make choices that will make them better off. d. Rational people use trade-off analysis when making "how much" decisions.

b

71. The penthouse apartment in most high-rise apartment buildings usually costs more to rent than other apartments. This BEST illustrates the economic concept of: a. specialization. b. scarcity. c. equilibrium. d. opportunity cost.

b

100. In a voluntary economic transaction between a buyer and a seller, _____ can earn economic surplus from the transaction. a. only the buyer b. only the seller c. both the buyer and the seller d. neither the buyer nor the seller

c

107. Ivan has inherited his grandmother's 1963 Chevrolet Corvette, which he values at $60,000. Samantha is interested in buying such a car and is willing to pay up to $55,000. Ivan hears Samantha is looking for this particular car and offers to sell it to her for $70,000. A voluntary economic exchange _____ between Ivan and Samantha because _____ positive economic surplus from the transaction. a. occurs; both Ivan and Samantha receive b. occurs; only Samantha receives c. does not occur; only Ivan receives d. does not occur; neither Ivan nor Samantha receives

c

119. The opportunity costs of a decision may include each of these types of costs EXCEPT: a. out-of-pocket financial costs. b. forgone financial costs. c. sunk costs. d. nonfinancial costs.

c

125. Sunk costs are costs that: a. are potential costs associated with a particular decision. b. are part of the opportunity costs of a decision. c. are incurred in the past and cannot be reversed. d. should be considered in any decision.

c

127. Rose's parents have booked and paid for a family trip to Aspen, Colorado, during her spring break. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose needs to decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her friends on the trip to Destin include each of these EXCEPT: a. her parents' anger if she skips the family trip to Aspen. b. her contribution to gas money for the drive to Destin. c. the ski lift ticket her parents have already purchased for her. d. the hotel costs she will split with her friends in Destin.

c

133. Patel is a college student living alone in a campus apartment. He is finishing cooking dinner when his friends text him to join them at the dining hall on campus for dinner. He now must decide whether to eat the dinner he prepared or walk to campus to meet his friends at the dining hall. Patel should consider all these costs when making this decision EXCEPT the: a. time it will take to go meet his friends and walk back. b. amount of money he will spend at the dining hall. c. money spent on the groceries he used to cook dinner. d. value he places on not eating dinner alone.

c

135. You are thinking of starting a tutoring service. You already have a part-time job on campus that pays $20 per hour. You think you can tutor fellow students for five hours each Saturday at $25 per hour, and you have already printed $10 worth of flyers to hang on campus for advertising. If you were not tutoring, you could work another five hours at your campus job. How much economic surplus will you generate each week if you start tutoring? a. $125 b. $100 c. $25 d. $15

c

136. You have paid $100 for student season tickets to the football games at your university. It is halfway through the season, and the team has not won any games. You are considering whether you will attend any future games this season. All of these are costs or benefits you should consider when making this decision EXCEPT the: a. cost of a hotdog and soda you will inevitably buy at a future game. b. time spent at the game rather than studying. c. frustration experienced from watching the team lose in previous games. d. $5 you will earn per game by selling the remaining tickets.

c

153. Following the Rational Rule, the maximum economic surplus occurs when: a. total benefits equal total costs. b. total benefits exceed total costs. c. marginal benefits equal marginal costs. d. marginal benefits exceed marginal costs.

c

155. When faced with a quantity decision, the economic surplus stops increasing when: a. total benefits equal to total costs. b. total benefits exceed total costs. c. marginal benefits equal marginal costs. d. marginal benefits exceed marginal costs.

c

161. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be the total revenue of her store? a. She will hire two workers and the revenue of the store will be $1,400. b. She will hire three workers and the revenue of the store will be $1,800. c. She will hire four workers and the revenue of the store will be $2,000. d. She will hire five workers and the revenue of the store will be $2,000.

c

162. Marie is a manager at an electronics store and has to decide how many workers to hire. If she hires one worker, her revenue is $800 per day. If she hires another worker, she can make another $600 per day. The marginal benefit of hiring another worker decreases by $200 with each additional hire. Assuming that workers are paid $20 per hour and work eight hours, how many employees should Marie hire, and what will be her total cost for labor? a. She will hire two workers at a total cost of $160. b. She will hire three workers at a total cost of $480. c. She will hire four workers at a total cost of $640. d. She will hire five workers at a total cost of $2,000.

c

163. Charles is a manager at a coffee shop, and he has to decide how many workers to hire. One worker can make 25 drinks that sell for $5 on average in one hour. A second worker can make another 20 drinks in one hour. The marginal benefit of each additional worker decreases by five drinks, with each additional hire. Given that workers are paid $15 per hour and have eight-hour shifts, how many employees should Charles hire for each hour? a. three b. four c. five d. six

c

173. The price of coffee at a local coffee shop is $2.50. Cheryl is willing to pay $8 for her first cup of coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase? Copyright Macmillan Learning. Powered by Cognero. Page 47 Name: Class: Date: Chapter 1 a. one b. two c. three d. four

c

179. Diane is a student studying economics and currently working on her class schedule for next semester. She considers the fact that more and more data is available every day and that data interpretation skills are learned by taking additional economics courses in her course selection. This acknowledgment highlights the dependencies that exist: a. between her own individual choices. b. between people or businesses in the same market. c. between markets. d. through time.

c

18. An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. Each location will have a manager with a salary of $4,000 per month and two part time employees with salaries of $2,000 each per month. Additional operating costs, including rent and utilities, will be $6,000 per month at each location. The investor projects that after the business gains traction, the first location will have 1,100 members. The second location will bring in 950 members. The third and fourth locations will bring in 350 and 200 members, respectively. The monthly membership fee will be $45 per member. How many locations should the investor franchise? a. one b. two c. three d. four

c

182. Harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics course to help with this decision. By considering the effects that reduced financial investments in petroleum companies will have on his expected salary, he is acknowledging the dependencies that exist: a. between his own choices. b. between people or businesses in the same market. Copyright Macmillan Learning. Powered by Cognero. Page 49 Name: Class: Date: Chapter 1 c. between markets. d. through time.

c

188. According to the interdependence principle, when faced with a decision, you should ask what: a. else might my decision affect? b. else might affect my decision? c. else might my decision affect and what else might affect my decision? d. past decisions might my decision affect?

c

181. Harry is an engineering student taking an economics elective in his senior year. He has the option to work as a petroleum engineer or to design rollercoasters after college. He uses concepts from his economics course to help with this decision. When he considers the increasing popularity of electronic vehicles and a decrease in demand for petroleum in the future, he is acknowledging the dependencies that exist: a. between his own choices. b. between people or businesses in the same market. c. between markets. d. over time.

d

19. An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $2,000 each per month. The investor values their time spent overseeing each location at $7,500 per month. Additional operating costs, including rent and utilities, will be $6,000 per month at each location. The investor projects that when the business gains traction, the first location will have 1,000 members. The second location will bring in 900 members. The third and fourth locations will bring in 300 and 200 members, respectively. The monthly membership fee will be $70 per member. The investor has decided to definitely open two locations. Should they open a third location? a. Yes, because marginal benefit would exceed marginal cost. b. Yes, because marginal cost would exceed marginal benefit. c. No, because marginal cost would exceed marginal benefit. d. No, because marginal benefit would exceed marginal cost.

c

197. Consider the decision to read your textbook on economics regularly. Which of the four core principles of economics applies to the notion that each extra page you read and each extra problem you complete will help you increase your understanding of the material? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

c

201. Consider your decision to attend class in college or skip it. Which of the four core principles of economics applies to the notion that each additional class you attend helps increase your likelihood of mastering the material? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

c

21. A social media influencer is quickly gaining followers, and he's offered his first brand deals. Each deal offers a $200 payment. In exchange, the influencer must advertise the brand by creating posts and responding to comments. He would use his personal time for each brand deal. To accept the first deal, he would give up his Friday night, which he values at $150. For the second and third deals, he would give up his Saturday afternoon and Sunday afternoon, which he values at $200 and $250, respectively. He has already accepted two brand deals. Should he accept a third deal? a. Yes, because marginal benefit would exceed marginal cost. b. Yes, because marginal cost would exceed marginal benefit. c. No, because marginal cost would exceed marginal benefit. d. No, because marginal benefit would exceed marginal cost.

c

23. Blake has successfully launched a massage therapy business, but he now receives more requests for bookings than his availability. He must determine how many new therapists to hire. Blake currently provides 15 total weekly massages. Hiring the first therapist would bring the total to 40 massages per week. Adding a second therapist will result in 60 total massages per week. The third and fourth therapists will result in 75 and 80 total weekly massages. A client pays $120 for a massage, and Blake pays therapists $1,000 per week. How many therapists should Blake add to his team? a. one b. two c. three d. four

c

47. A central and fundamental theme in economics is that: a. for me to have something, someone else must be willing to give it up. b. the United States is a rich country, but we are simply not aware of it. c. resources are limited and cannot satisfy all the ways a society wants to use them. d. we can build as much as we want, since resources are unlimited.

c

58. Ralph is offered a free ticket to a Yankees game—a ticket he cannot resell. His opportunity cost of going to the baseball game is: a. zero—the ticket was free. b. the price listed on the ticket. c. whatever Ralph would have done had he not gone to the game. d. the price listed on the ticket and whatever Ralph would have done had he not gone to the game.

c

62. The cost of postponing the Tokyo Olympics to 2021 in the wake of the COVID-19 virus outbreak _____ an opportunity cost of hosting the 2020 Olympic Games _____. a. is not; because few people attending the 2020 Olympics will spend much time outside Olympic venues b. is; if the costs of the Tokyo postponement are equal to a significant percentage of the total amount spent by Tokyo taxpayers to host the 2020 Olympics c. is; if the cost of postponing the Tokyo games would not occur unless Tokyo was hosting the 2020 Olympic games d. is not; because the cost of postponing the Tokyo Olympics is a necessary expense

c

63. While buying refreshments for an upcoming party, you notice that a six-pack of Bud Lite Beer costs $4 and that a six-pack of Miller Lite Beer costs $8. You buy the six-pack of Miller Lite Beer, although you wonder if maybe two six-packs of Bud Lite Beer would have been a better choice. The opportunity cost of the Miller Lite Beer is: a. $8. b. a six-pack of Bud Lite Beer. c. two six-packs of Bud Lite Beer. d. $8 and the six-pack of Bud Lite Beer.

c

66. Decisions made about quantities are: a. the same as making either-or decisions. b. best made when comparing prices and costs. c. best made using the marginal principle. d. optimal when costs equal benefits.

c

67. A choice made using the marginal principle: a. involves distinguishing between microeconomics and macroeconomics. b. is an analysis of costs, benefits, and trade-offs. c. is a choice regarding whether to do a little more or a little less of an activity. d. involves comparing the costs and benefits of an activity.

c

69. You are analyzing a trade-off when you compare the _____ and _____ of doing something. a. direct costs; opportunity costs b. marginal benefits; total benefits c. costs; benefits d. money costs; marginal benefits

c

90. Nerida is thinking of buying a car to avoid taking Uber to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500. The cost of the car for the year is: a. $15,000. b. $13,500. c. $1,500. d. $28,500.

c

93. _____ is a measure of how much your decision has _____ your well-being. a. Willingness to pay; improved b. Willingness to pay; reduced c. Economic surplus; increased d. Economic surplus; decreased

c

97. Amanda goes to a local café and orders a sandwich. She is willing to pay $10 for it. The price of the sandwich is $4. The cost to the café to produce the sandwich is $1. How much economic surplus does the café receive when Amanda purchases the sandwich? a. $6 b. $4 c. $3 d. $1

c

110. You are thinking of going out to dinner at a restaurant with your friends. The meal is expected to cost you $50, you typically leave a 20% tip, and a round-trip Uber ride will cost you $20. You value the restaurant meal at $20, and the time spent with your friends at $30. If you did not go out to the restaurant, you would eat at home using groceries that cost you $10. You should _____ to dinner with your friends because the benefit of doing so is _____ than the cost. a. go; greater b. go; less c. not go; greater d. not go; less

d

111. It is a rainy day, and you are considering taking an Uber one mile to meet some friends. You have decided you are willing to pay $20 to avoid getting wet from the rain. The trip would normally cost you $8, but because Copyright Macmillan Learning. Powered by Cognero. Page 34 Name: Class: Date: Chapter 1 of the weather the surcharge is twice the regular cost. You should _____ because the benefit to you of taking the Uber is _____ than the cost. a. walk; less b. walk; more c. take an Uber; less d. take an Uber; more

d

123. It is a beautiful afternoon, and you are considering taking a leisurely stroll through the park. Your alternatives to walking are streaming a movie that you value at $5, taking a nap that you value at $7, or reading a new book that you value at $12. What is the opportunity cost to you of taking the stroll through the park? a. $0 b. $5 c. $7 d. $12

d

126. Jonathan is deciding whether to study for his economics exam at a café or go to a concert with friends tonight. The cost of the concert ticket that he purchased yesterday is _____ in his opportunity cost and represents a _____ cost. a. included; financial b. included; nonfinancial c. not included; financial d. not included; sunk

d

128. Rose's parents have booked a family trip to Aspen, Colorado, during her spring break. They have agreed to pay for everything except her plane ticket. Rose's friends recently decided to drive to Destin, Florida, for spring break. Rose must now decide whether to join her parents in Aspen or drive to the beach with her friends. The opportunity costs of joining her parents in Aspen include each of these EXCEPT: a. the cost of her plane ticket to Aspen. b. memories she will miss with her friends. c. the stress of traveling via plane and navigating airports. d. the nonrefundable deposit her friends paid for the beach house in Destin.

d

130. Carolyn is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user may face. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should ignore all of these costs when calculating the opportunity costs of leaving college EXCEPT the: a. time she will spend working on the app instead of studying. b. 90 credit hours she has already completed for her degree. c. tuition costs she has already paid to her college. d. skills she may gain from her final year of economics courses.

d

131. Carolyn is a junior in college studying economics. She has created a new software application that applies the four principles of economic decision making to any potential decision that a user may face. She is considering leaving school after this academic year to pursue further development of her app. Carolyn should consider all of these costs when calculating the opportunity costs of staying in college EXCEPT the: a. time she will spend studying instead of working on the app. b. potential forgone profits from selling her app. c. potential fame that could come from creating a useful app. d. cost of supplies and the technology fees she paid during the first three years of college.

d

14. You own a food truck, and you've been operating in the parking lot of your friend's business. You pay your friend $900 per month to park at their business, and your food truck revenue is $6,000 per month. You're considering whether you should continue to park in your friend's lot or move to another location. Your revenue in the new location would be $10,500 per month, but you'd have to pay $1,500 per month to park there. You would also have to buy more fresh ingredients to meet the increased sales, so your monthly operating costs would increase by $600. If you choose to keep parking in your friend's lot, are you correctly applying the cost benefit principle? a. Yes, because you are maximizing your economic surplus by parking in your friend's lot. b. Yes, because moving to the new location would decrease your economic surplus. c. No, because your economic surplus varies depending on how you frame your costs. d. No, because you could increase your economic surplus by moving to the new location.

d

174. The principle that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future is known as the _____ principle. a. cost-benefit b. opportunity cost c. marginal d. interdependence

d

177. Diane is a student studying economics and currently working on her class schedule for next semester. When she considers taking another economics course and how to meet prerequisites for future economics courses, she is acknowledging dependencies that exist: a. between her own choices. b. between people or businesses in the same market. c. between markets. d. through time.

d

187. Dependencies over time reflect the fact that: a. you have limited resources. b. society has limited resources. c. resources are spread across varying markets. d. resources can be spread across time.

d

194. Consider the decision to read your economics textbook. Which of the four core principles of economics applies to the notion that reading this textbook will help you establish a solid foundation of understanding economics, which will be beneficial for future courses? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

d

198. Consider your decision to attend class each day or skip it. Which of the four core principles of economics applies to the notion that attending class will MOST likely help you understand the material better and perform well on future exams? a. the cost-benefit principle b. the opportunity cost principle c. the marginal principle d. the interdependence principle

d

28. Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring efficient management of costs. In the past, if Nissan devoted all of its resources to manufacturing sedans, it could produce 480,000 sedans per year at one manufacturing plant. If Nissan devoted all of its resources to manufacturing trucks, it could produce 240,000 trucks per year. A new production technique now allows Nissan to produce either 600,000 sedans or 360,000 trucks per year. How would Nissan's production possibilities frontier reflect this new production technique? a. A movement along the production possibilities frontier to manufacture more sedans. b. A movement along the production possibilities frontier to manufacture more trucks. c. An inward shift of the production possibilities frontier. d. An outward shift of the production possibilities frontier.

d

41. You are considering whether to invest in your friend's business or keep your money in your savings account. What is the opportunity cost of investing in your friend's business? a. investing in a different business b. foregone income c. your time d. interest you could have earned from the savings account

d

52. The opportunity cost of something is: a. the amount you pay to take advantage of a lucrative opportunity. b. a payment not made for a product. c. the benefit derived from a product. d. the next best alternative you have to give up to get it.

d

53. The opportunity cost of a good is: a. smaller during periods of economic recession. b. equal to the monetary cost of the good. c. larger during economic booms. d. the value of the next best alternative given up to acquire the good.

d

56. Emma spends $40,000 for one year's attendance at university. The opportunity cost of one year at university for Emma is: a. $40,000. b. whatever she would have purchased with the $40,000 had she not attended university. c. whatever she would have earned had she not attended university. d. whatever she would have purchased with the $40,000 plus whatever she would have earned had she not attended university.

d

57. If the state of New York allocates additional spending on after-school programs for at-risk youths, then the opportunity cost of these expenditures is: a. zero, if the state is running a budget surplus. b. the dollar amount of the additional spending. c. relevant only if taxes must be raised to fund the spending. d. the value of alternative expenditures forgone in making this allocation.

d

6. Your $10 donation to a charity provides one blanket to an unhoused person. Given that you followed the Rational Rule for Consumers in the transaction, you can conclude that your willingness to pay for this type of generosity is at least: a. $1. b. $5. c. $8. d. $10.

d

8. A few years back, Netflix signed a $100 million deal with Jerry Seinfeld, which included two new stand-up specials and the rights to some of Seinfeld's previous work. Which statement can you conclude is TRUE? a. The $100 million deal lowered Netflix's economic surplus. b. Netflix is worse off because of the cost of the $100 million. c. The $100 million deal provided fewer total benefits than total cost to Netflix. d. The cost of the $100 million deal was no greater than the benefits of the deal.

d

81. Economists convert costs and benefits into money equivalents by evaluating an individual's: a. sunk costs. b. marginal benefits. Copyright Macmillan Learning. Powered by Cognero. Page 28 Name: Class: Date: Chapter 1 c. opportunity costs. d. willingness to pay.

d

95. Kevin goes to a local coffee shop and orders a medium-sized latte. He is willing to pay $6 for it. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does the coffee shop receive when Kevin purchases the latte? a. $6 b. $4 c. $2 d. $1

d

98. Gary is willing to pay $700 for a new iPad. The Apple Store is selling a new iPad for $600. It costs Apple $400 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad? a. $700 b. $600 c. $200 d. $100

d