MICRO Chap. 1 Practice Questions

NEED SPREADSHEET. The total cost of a 700 Mhz computer is A) $1,000. B) $900. C) $300. D) $200. E) $100.

A. $1,000

The Third Wave Computer Company employs Sally to assemble personal computers. Sally can assemble 1 computer if she works 1 hour, 4 computers in 2 hours, 7 computers in 3 hours, 9 computers in 4 hours, and 10 computers in 5 hours. Each computer consists of a motherboard that costs $250, a hard drive costs $150, a case costs $25, a monitor that costs $200, a keyboard at $50 and a mouse costs $25. The cost of employing Sally is $50 per hour. What is the marginal cost of producing the computers Sally assembles during her second hour of work? A) $2,150 B) $2,850 C) $2,800 D) $700 E) $750

A. $2150

If your reservation price for a pre-cooked meal is $15 and the opportunity cost of the pre-cooked meal is $12, the economic surplus of having a pre-cooked meal equals: A) $3. B) minus $3. C) $27. D) $12/$15. E) $15/$12.

A. $3

NEED GRAPH. The marginal benefit of adding the 10th shirt to ones wardrobe is A.) $75 B.) $45 C.) $30 D.) $10 E.) 0

A. $75 (find where 10 t-shirts hits the MB line)

The web site for this textbook can be viewed simultaneously by thousands of students around the world without paying money to view it. Does this suggest that the concept of scarcity does not apply to web sites? A) No, because each of the students incurs an opportunity cost measured by the next best alternative to viewing the web site. B) Yes, because an additional student viewing the web site does not prevent another student from viewing it. C) Yes, because the students do not have to pay money to view the web site and, thus they do not have to forgo something else to view it. D) No, because the more students who view it the slower the transmission of the information to each of the students. E) Yes, because the technology of the internet and the world wide web have made the principles of economics outdated.

A. No, because each of the students incurs an opportunity cost measured by the next best alternative to viewing the web site.

Suppose a person makes a choice that seems inconsistent with the cost-benefit principle. Which of the following statements represents the most reasonable conclusion to draw? A) The person (explicitly or implicitly) over-estimated the benefits or under-estimated the costs or both B) The abstraction of the cost-benefit principle is so great as to be unable to explain behavior. C) The person does not grasp how decisions should be made. D) The person is simply irrational. E) Because people don't explicitly calculate benefits and costs, it is not surprising that choices are made which violate the cost-benefit principal.

A. The person (explicitly or implicitly) over-estimated the benefits or under-estimated the costs or both

The scarcity principle applies to A) all decisions. B) only market decisions, e.g., buying a car. C) only non-market decisions, e.g., watching a sunset. D) only the poor. E) only the wealthy.

A. all decisions

The marginal cost of an activity is the A) change in the costs of the activity divided by the change in the level of the activity. B) same as the total costs of the activity. C) ratio of total costs to the level of the activity. D) change in the level of the activity divided by the change in the costs of the activity. E) reservation costs.

A. change in the costs of the activity divided by the change in the level of the activity

The scarcity principle indicates that __________ and the cost-benefit principle indicates __________. A) choices must be made; how to make the choices B) how to make the choices; choices must be made C) choices must be made; just one of many possible ways to make the choices D) choices must be made; the choices will be poor E) choices must be made; the costs can never outweigh the benefits of the choices

A. choices must be made; how to make the choices

Deciding to pursue an activity as long as the extra benefits are at least equal to the extra costs defines the A) cost-benefit principle. B) scarcity principle. C) No-Free-Lunch principle. D) marginal principle. E) extra principle.

A. cost-benefit principle

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50 that it is a good offer but if he wants to buy something with a price of $500 it is not a good offer. This is an example of A) inconsistent reasoning; saving $20 is saving $20. B) the proper application of the cost-benefit principle. C) rational choice because in the first case he saves 40% and in the second case he saves 4%. D) marginal cost equals marginal benefit thinking. E) opportunity costs.

A. inconsistent reasoning; saving $20 is saving $20

The textbook suggests that applying the basic principles of economics to the details of everyday life will A) make one an economic naturalist. B) get one invited to fewer parties. C) lessen one's understanding of the world. D) give an air of intellectual superiority. E) make even the simplest decision overly complex and paralyze action.

A. make one an economic naturalist

In deciding the number of students to allow to enroll in the economics classes, the Chairperson of the Economics Department is making a(n) __________________ decision. A) microeconomic B) macroeconomic C) economic surplus D) marginal choice E) imperfect

A. microeconomics

The study of individual choices and group behavior in individual markets defines A) microeconomics. B) economics. C) the scarcity principle. D) macroeconomics. E) game theory.

A. microeconomics

Economic models claim to be a(n) A) reasonable abstraction of how people make choices, highlighting the most important factors. B) exact replication of the decision-making process people use. C) interesting chalkboard exercise with little applicability to the real world. D) exceptionally accurate method of predicting nearly all behavior of everyone. E) absolutely correct description of the world.

A. reasonable abstraction of how people make choices, highlighting the most important factors.

Another name for the marginal benefit of an activity is the: A) reservation price. B) opportunity cost. C) economic surplus. D) No-Free-Lunch principle. E) scarcity.

A. reservation price

Jose is vacationing on Padre Island during Spring Break. He goes to the beach early on a sunny afternoon because he knows it will be crowded and he wants to have sufficient room to put out a large beach towel to lie on while sunning himself. Later that afternoon the beach fills to capacity and the family next to Jose raises a large beach umbrella to shade themselves from the sun. The shade from the umbrella also covered the area where Jose was lying. In this case, the sunlight was: A) scarce because Jose would have to forego a place on the beach to receive the sunlight. B) not scarce because it is freely available (i.e., Jose did not have to pay money for it). C) scarce because the neighboring family absorbed all the sunlight with their umbrella. D) not scarce because Jose could move to another location to receive the sunlight. E) scarce because the beach was full to capacity

A. scarce because Jose would have to forego a place on the beach to receive the sunlight

NEED SPREADSHEET. Choosing the 1,000 Mhz computer would be inefficient because A) the extra benefit is less than the extra cost. B) the extra benefit is equal to the extra cost. C) it is impossible to tell the difference compared to a 600 Mhz computer. D) it will be surpassed by a 1,100 Mhz computer very soon. E) the total cost exceeds the total benefit.

A. the extra benefit is less than the extra cost

If all the world's resources were to magically increase 100 fold, then A) the scarcity principle would still govern behavior. B) economics would no longer be relevant. C) the scarcity principle would disappear. D) everyone would be satisfied. E) tradeoffs would become unnecessary.

A. the scarcity principle would still govern behavior

Salvator bid on a Mark McGuire baseball card that was offered in an auction on an Internet web site. His first bid for $10 was quickly surpassed by another bidder, and he entered a second bid for $20. This was also eventually surpassed, at which time he entered a bid for $50 (the maximum he was willing to bid for the card). When the auction deadline passed, he was notified that his was the highest bid and he would soon be receiving the card. In his excitement, he logged onto a chat board for baseball card collectors and posted a notice that he had just purchased the Mark McGuire card. Soon he received a reply from another collector offering to buy the card for $60, but Salvator politely declined the offered. During the next few days a series of offers were made, all of which he turned down until a collector offered to pay $75 for the card. Salvator decided he could not pass up this offer and accepted it. From this we can conclude that Salvator's economic surplus from purchasing the Mark McGuire card was equal to: A) $75. B) $25. C) $50. D) $125. E) $40.

B. $25

Sophia wants to go to a friend's house this evening, but has promised her mother that she would clean the house during that time. Her brother, James, has offered to clean the house for her if she will pay him $10. Sophia replies, "I'll pay you five dollars (and not a cent more!)." The: A) $10 represents Sophia's reservation price of going to her friend's house this evening. B) $5 represents Sophia's opportunity cost of cleaning the house this evening. C) $10 represents James's reservation price and Sophia's opportunity cost of going to her friend's house this evening. D) difference between the $10 James has asked for to clean the house and the $5 Sophia has offered represents the economic surplus of going to her friend's house this evening. E) $10 represents the opportunity cost and the $5 is the marginal benefit of going to her friend's house this evening.

B. $5 represents Sophia's opportunity cost of cleaning the house this evening.

NEED SPREADSHEET. The marginal benefit of upgrading from a 600 Mhz computer to a 700 Mhz computer is A) $1,500. B) $500. C) $50. D) $5. E) $2.14.

B. $500

Assume the minimum that Joe would be willing to accept to drive to the university campus is equal to the amount he saved on the concert ticket (see question 85). What would be the amount of his economic surplus if he bought his textbooks at the university bookstore rather than the Internet? A. $5 B. $1 C. $50 D. $20 E. There would be no economic surplus from purchasing the books at the university bookstore.

B. 1

Shelly purchases a leather purse for $400. One can infer that A. she paid too much B. her reservation price was at least $400 C. her reservation price was exactly $400 D. her reservation price was less than $400 E. she paid too little

B. her reservation price was at least $400

Which of the following statements would an economist label a "positive" statement? A) I like the temperature in the classroom. B) It is 72 degrees inside this classroom. C) It is too hot in this classroom; we should lower the temperature. D) You should not have worn a sweater to class today.

B. It is 72 degrees inside this classroom.

The extra benefit that comes from an extra unit of activity is called the _________of the activity. A) benefit. B) marginal benefit. C) marginal cost. D) average benefit. E) reservation benefit.

B. marginal benefit

Choosing to study for an exam until the extra benefit (improved score) equals the extra cost (mental fatigue) is A) not rational. B) an application of the cost-benefit principle. C) an application of the scarcity principle. D) the relevant opportunity cost. E) less desirable than studying for the entire evening.

B. an application of the cost-benefit principle

The 7th beer that Tim consumes will produce an extra benefit of 10 cents and has an extra cost of zero (Tim is at a frat party). The cost-benefit principle predicts Tim will A. realizing he has had been drinking to much and go home. B. drink the 7th beer and continue until the marginal benefit of drinking another beer is zero C. volunteer to be the designated drunk D. not drink the 7th beer. E. flip a coin to decide

B. drink the 7th beer and continue unit the marginal benefit of drinking another beer is zero

According to the textbook, the incentive to save M dollars on a product is A. directly dependent on the price of the product B. purely a question of whether it is worth it to do what is necessary to receive the M dollars of saving C. stronger if the M dollars are a larger percentage of the list price of the product. D. inversely related to the price of the product. E. weaker if the M dollars are a small percentage of the list price of the product.

B. purely on a question fo whether it is worth it todo what is necessary to receive the M dollars of savings.

Given the information in question 97, in order to maximize her income, Sonya should: A) ride the bus because it costs less money. B) take the cab because the opportunity cost is less than that of riding the bus. C) ride the bus because the opportunity cost is less than that of taking a cab. D) take the cab because the opportunity cost is greater than that of riding the bus. E) ride the bus because the opportunity cost is greater than that of taking a cab.

B. take the cab because the opportunity cost is less than that of riding the bus

Macroeconomics differ from microeconomics in that: A. the concept of scarcity applies to the latter but does not apply to the former. B. the latter studies individual markets while the former studies groups of markets, including the whole economy C. rational decisions are relevant to the former but not the latter. D. the former is the study of how people make choices under conditions of scarcity while the latter is concerned with the results of those choices for society. E. the former explains such concepts as how prices are determined in markets while the latter explains the overall price level.

B. the latter studies individual markets while the former studies groups of markets, including the whole economy.

The opportunity cost of an activity is the value of A) an alternative forgone. B) the next-best alternative forgone. C) the least-best alternative forgone. D) the difference between the chosen activity and the next-best alternative forgone. E) the alternative one would have preferred to choose.

B. the next-best alternative forgone.

Macroeconomics is distinguished by its concentration on A) choices. B) the performance of national economics and ways to improve upon the performance. C) individual markets. D) the level of prices in specific markets. E) abstract models.

B. the performance of national economics and ways to improve upon the performance

If a campus organization provides a free lunch to all students who show up, then A) the scarcity principle has been violated. B) the scarcity principle still applies to the decision to allocate the time to go and eat. C) the lunch is completely without cost. D) no tradeoffs are involved. E) it is a free lunch because no price was charged.

B. the scarcity principle still applies to the decision to allocate the time to go and eat

The existence of the cost-benefit principle stems from A) the economist's mind. B) the tradeoffs the scarcity principle indicates must be made. C) itself, i.e., it stands on its own. D) opportunity costs. E) the unlimited nature of resources.

B. the tradeoffs the scarcity principle indicates must be made

The use of economic models, like the cost-benefit principle, means economists believe that A) this is how people explicitly choose between alternatives. B) this is a reasonable abstraction of how people choose between alternatives. C) those who explicitly make decisions this way are smarter. D) with enough education, all people will start to explicitly make decisions this way. E) this is the way the world ought to explicitly make decisions.

B. this is a reasonable abstraction of how people choose between alternatives.

Whether studying the size of the U.S. economy or the number of children a couple will choose to have, the unifying concept is A. wants are limited, resources are limited, and thus tradeoffs much be made. B. wants are unlimited, resources are limited, and thus tradeoffs must be made C. wants are unlimited, resources are limited to some but not to others and thus some people must make tradeoffs D. wants are unlimited, resources are unlimited, and thus nirvana has been reached E. wants are unlimited, resources are limited, and thus government needs to do more

B. wants are unlimited, resources are limited, and thus tradeoffs must be made.

Janie must either mow the lawn or wash clothes, earning her a benefit of $30 or $45, respectively. Janie will therefore choose to _________because the economic surplus is ________. A) mow; greater B) wash; greater C) mow; smaller D) wash; smaller E) mow; the same as for washing

B. wash; greater

Economics is conventionally divided into two subjects called: A) marginal benefit and marginal cost. B) reservation price and opportunity cost. C) microeconomics and macroeconomics. D) rational economics and irrational economics. E) economic surplus and economic deficit.

C. microeconomics and macroeconomics

In order for an economic model to be valid, A) all people must explicitly mimic the model. B) most people must explicitly mimic the model. C) most people must act as if they explicitly mimic the model. D) it must gain professional acceptance. E) it must be mathematical.

C. most people must act as if they explicitly mimic the model

NEED GRAPH. The marginal cost of adding the 10th shirt to one's wardrobe is A) $75. B) $45. C) $30. D) $10. E) 0.

C. $30 (find the MC line.)

Amy is thinking about going to the movies tonight to see Nutty Professor 2. A ticket costs $7 and she will have to cancel her dog-sitting job that pays $30. The cost of seeing the movie is A) $7. B) $30. C) $37. D) $37 minus the benefit of seeing the movie. E) indeterminate

C. $37

NEED SPREADSHEET. The marginal cost of upgrading from a 700 to a 800 Mhz computer is A) $600. B) $500. C) $400. D) $200. E) $100.

C. $400

If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are A) $50, $150, and $315. B) $50, $41.67, $115. C) $50, 125, and $230. D) $50, $175, and $405. E) impossible to calculate with information given.

C. $50, 125 and $230

Which of the following questions would not be part of macroeconomics? A. What caused the great depression? B. At what rate does the US economy typically grow? C. Did the sharp increase in gasoline prices alter SUV sales? D. How does government spending affect the economy? E. Do trends exist in the national rate of unemployment

C. Did the sharp increase in gasoline prices alter SUV sales?

Joe has decided to purchase his textbooks for the semester. His options are to purchase the books via the Internet with next day delivery to his home at a cost of $250, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $245. Last week he drove to campus to buy a concert ticket because they offered 20 percent off the regular price of $20. A) It would not be rational for Joe to drive to campus to purchase the books because the $5 saving is only two percent of the cost of the books, and that is much less than the 20 percent he saved on the concert ticket. B) It would be rational for Joe to drive to campus because it costs less to buy the books there than via the Internet. C) It would be rational for Joe to drive to campus because the $5 saving is more than he saved by driving there to buy the concert ticket. D) It would not be rational for Joe to drive to campus to purchase the books because the cost of gas and his time must certainly be more than the $5 he would save. E) There is insufficient information to determine whether it would be rational or not for Joe to purchase the books via the Internet or on campus.

C. It would be rational for Joe to drive to campus because the $5 saving is more than he saved by driving there to buy the concert ticket.

That individuals make inconsistent choices and the inconsistencies have a strong pattern is, in the view of the textbook, A. evidence of the severer limitations of economic models. B. an indication of widespread irrationality C. additional support for the study of economics to identify the inconsistencies and improve decision-making D. of limited importance. E. a well kept secret that should remain that way.

C. additional support for the study of economics to identify the inconsistencies and improve decision-making

An economic naturalist is described as someone who A. uses economic arguments to protect forests and wetlands from development B. Has a natural talent for drawing graphs C. applies economic insights to everyday life D. studies the process of natural selection in marginal cost and marginal benefit framework. E. is concerned about environmental issues but also enjoys wealth accumulation

C. applies economic insights to everyday life

Suppose a retail store was offering 10% off all prices on all goods. The incentive to take advantage of the 10% savings is A) unrelated to the list price of one good. B) inversely related to the list price of the good. C) directly related to the list price of the good. D) independent of the list price. E) stronger for those buying goods with low list prices.

C. directly related to the list price of the good

The range of topics or issues that fit within the definition of economics is A) limited to market activities, e.g., buying soap. B) limited to individuals and firms. C) extremely wide, requiring only the ideas of choice and scarcity. D) limited to governments and nations. E) very limited.

C. extremely wide, requiring only the ideas of choice and scarcity

Economics is best defined as the study of A) prices and quantities. B) inflation and interest rates. C) how people make choices under the conditions of scarcity and the results of the choices. D) graph drawing. E) wages and incomes.

C. how people make choices under the conditions of scarcity and the results of the choices.

The study of national economies and policies to improve their performance is known as A) microeconomics. B) economics. C) macroeconomics. D) intereconomics. E) intraeconomics.

C. macroeconomics

The extra cost that results from an extra unit of an activity is the A) marginal benefit. B) marginal surplus. C) marginal cost. D) reservation cost. E) same as the opportunity cost.

C. marginal cost

The reservation price of a particular good or service is the A. minimum amount one would be willing to pay fterm-12or it. B. same as the market price. C. maximum amount one would be willing to pay for it D. price t which develops reservations about its quality E. price one must pay to ensure one gets it.

C. maximum amount one would be willing to pay for it

A rational person is one that A) is reasonable. B) makes choices that are easily understood. C) possesses well-defined goals and seeks to achieve them. D) believes the claims made by infomercials. E) highly cynical.

C. possesses well-defined goals and seeks to achieve them

The cost-benefit principle: A) is not one of the authors' core ideas in economics. B) implies that the cost of all alternatives should be included when choosing among alternatives. C) states that an action should be taken only if the extra benefit is at least as great as the extra cost. D) states that an action should be taken only if the extra benefit is greater than the extra cost. E) states that an action should be taken only if the extra benefit is less than the extra cost.

C. states that na action should be taken only if the extra benefit is at least as great as the extra cost.

With ATM machines it is possible to retrieve cash from the bank at any time. One hundred years ago, one could only get cash from the bank during business hours, say, 9 am to 3 pm. The difference is because A) flexibility was not valued 100 years ago. B) it was impossible to provide 24 hour a day service 100 years ago. C) the cost of providing 24 hour a day service is much lower today. D) government forced banks to become more convenient. E) cash is a more popular means of making payments today.

C. the cost of providing 24 hour a day service is much lower today.

Imagine a world with unlimited resources (including time). On this planet, A) personal strife would not exist. B) the scarcity principle would not apply but the cost-benefit principle would. C) the cost-benefit principle would be irrelevant because tradeoffs would not exist. D) the scarcity principle would still apply. E) the discipline of economics would be more important.

C. the cost-benefit principle would be irrelevant because tradeoffs would not exist.

The economic surplus of a particular action is A) the value of the action. B) the cost of the action. C) the difference between the benefit and the cost of the action. D) the average of the benefits and costs. E) the ratio of the benefits to the costs.

C. the difference between the benefit and the cost of the action

Dean decided to play golf rather than prepare for his exam in economics that is day after tomorrow. One can infer that A) Dean has made an irrational choice. B) Dean is doing poorly in his economics class. C) the economic surplus from playing golf exceeded the surplus from studying. D) Dean needs to grow up. E) the cost of studying was greater than the cost of golfing.

C. the economic surplus from playing golf exceeded the surplus from studying.

Benny has one hour before bedtime and he can either watch TV or listen to his new Korn CD. He chooses to listen to the CD. The scarcity principle's influence on Benny is seen in A) the decision to listen to music. B) the decision not to watch TV. C) the fixed amount of time before bed. D) the decision to choose between TV and music. E) Benny's taste in music.

C. the fixed amount of time before bed.

NEED SPREADSHEET. Buying the 700 Mhz computer would be inconsistent with the cost-benefit principle because A) the total benefit exceeds the total cost. B) the average benefit exceeds the average cost. C) the marginal benefit exceeds the marginal cost. D) the difference between the total benefit and the total cost is positive. E) the total benefit is too large.

C. the marginal benefit exceeds the marginal cost

Forest is a mountain man living in complete isolation in Montana. He is completely self sufficient through hunting, fishing, and farming. He has not been in the city to buy anything in five years. One can infer A) the scarcity principle does not apply to Forest. B) Forest is not required to make choices. C) the scarcity principle still applies because more hunting means less fishing and so on. D) Forest is very satisfied. E) Forest knew the Unabomber.

C. the scarcity principle still applies because more hunting means less fishing and so on

The concept of scarcity applies equally to Bill Gates and a homeless person because; A) both have the same legal rights protected by the U.S. constitution. B) they have the same access to the markets for goods and services. C) there are only 24 hours in the day for both of them. D) they are both consumers. E) both must breathe air in order to live.

C. they are only 24 hours in the day for both of them

The scarcity principle indicates that A) no matter how much one has, it is never enough. B) compared to 100 years ago, individuals have less time today. C) with limited resources, having more of "this" means having less of "that." D) because tradeoffs must be made, resources are therefore scarce. E) the wealthier a person is, the fewer the number of tradeoffs he must make.

C. with limited resources, having more of "this" means having less of "that"

Rajiv has estimated that the additional benefit of writing 100 more lines of computer programming code is $10 and the additional cost is $6. He should: A) not write the code because it would not be a rational choice. B) write the code because it would be a rational choice and an optimal quantity. C) write the code because it would be a rational choice but it is not an optimal quantity. D) not write the code because it would not be a rational choice but it would be an optimal quantity. E) not write the code because it would not be a rational choice, nor would it be an optimal quantity.

C. write the code because it would be a rational choice but is not an optimal quantity

NEED GRAPH. The net benefit of adding the 20th shirt to one's wardrobe is A) $20. B) $10. C) 0. D) -$10. E) -$20.

E. -$20. (MB-MC=NET)

NEED SPREADSHEET. The total benefit of an 800 Mhz computer is A) $400. B) $500. C) $800. D) $1,900. E) $2,200.

D. $1,900

NEED GRAPH. The best number of shirts to own is A) 5. B) 10. C) 12. D) 15. E) 20.

D. 15 (where the MC and MB cross ~equilibrium)

The Third Wave Computer Company sells each computer for computers $725. Using the information in question 88, how many hours should the Third Wave Computer Company employ Sally to maximize its benefit from her employment? A) 1 hour B) 2 hours C) 3 hours D) 4 hours E) 5 hours

D. 4 hours

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20. After the movie, she says to one of her friends that the movie was not worth it. Apparently, A) Jenna failed to apply the cost-benefit model to her decision. B) Jenna was not rational. C) the economic model of cost-benefit analysis failed. D) Jenna overestimated the benefits of the movie. E) this proves the limitations of economic models, specifically the cost-benefit principle.

D. Jenna overestimated the benefits of the movie.

The cost-benefit principle predicts that Juan should do X and not Z but instead Juan chooses to do Z. Which of the following statements is not a reasonable explanation for the difference in the predicted and actual outcome? A) Juan had information not contained in the application of the cost-benefit principle. B) Juan ignored information that should have been included. C) Juan inaccurately estimated a benefit, a cost, or both. D) The cost-benefit principle is inherently flawed and produces predictions rarely supported by observation. E) Juan faced a constraint not included in the cost-benefit principle.

D. The cost-benefit principle is inherently flawed and produces predictions rarely supported by observation.

The reservation price of a good or service is a monetary measure of the __________ to the consumer. A. necessity of the good B. quality of the good C. lowest price acceptable D. benefit of the good E. prestige of the good

D. benefit of the good.

The Smithville Elementary School Teachers Association petitions the Smithville School Board to provide a computer lab for their school. To support their argument the Association presents data from national studies that show when students are provided with computer training they earn an average of $5,000 of additional income during their lives. In order for the School Board to make a rational choice, it should: A) determine if other elementary schools have computer labs. B) build the computer lab because the children will be able to earn a higher income during their lives. C) not build the computer lab because the study was not based on a study of the Smithville area. D) build the computer lab if the additional cost per student is less than or equal to the additional income. E) build the computer lab if the additional cost per student is greater than or equal to the additional income.

D. build the computer lab if the additional cost per student is less than or equal to the additional income

The distinguishing feature of microeconomics is studying A) choices. B) the performance of national economics. C) the overall price level. D) choices made by individuals or groups in the context of individual markets. E) how to improve the performance of national economics.

D. choices made by individuals or groups in the context of individual markets

The logical implication of the scarcity principle is that A) one will never be satisfied with what one has. B) as wealth increases, making tradeoffs becomes less necessary. C) as wealth decreases, making tradeoffs becomes less necessary. D) choices must be made. E) resources need to be made unlimited.

D. choices must be made

The number of US households with access to the Internet and those with broadband connections is growing rapidly. As an economic naturalist, one could predict that when a major purchase is being considered, families will A) collect as much information as humanly possible beforehand. B) always buy online. C) never buy online. D) collect more information beforehand because the cost of finding and acquiring it is lower. E) collect more information beforehand because the benefit of information is now larger.

D. collect more information beforehand because the cost of finding and acquiring it is lower

Suppose Xena's reservation price for a new sword is $1,000 but she is able to purchase one for $900. Her __________ is __________. A) benefit; $100 B) cost; -$100 C) economic surplus; $1,000 D) economic surplus; $100 E) costs; -$900

D. economic surplus; $100.

The study of choices made in the face of scarce resources is the essence of A) political science. B) biology. C) sociology. D) economics. E) geography.

D. economics

Samantha has estimated that with a college education she will be able to earn an additional $40,000 of income. The cost of attending a state university is $25,000, while a private university costs $40,000 (all estimates are calculated in current dollars). Samantha would make a rational decision if she chooses to attend: A) the private university, but not the state university. B) the state university, but not the private university. C) neither the state nor the private university. D) either the state or the private university E) any university regardless of the cost and income.

D. either the state or the private university

The marginal benefit of an activity is the A) same as the total benefits of the activity. B) total benefit divided by the level of the activity. C) change in the activity divided by the change in benefits. D) extra benefit associated with an extra unit of the activity. E) little bit of benefit one gets from activities that are healthy but unpleasant.

D. extra benefit associated with and xtra unit of the activity

According to the textbook, psychologists have found that if people lose $10 on the way to make a $10 purchase they tend to __________ while if they make the $10 purchase and then lose or break the good they tend to __________. A) not make the purchase; make the purchase again B) not make the purchase; not make the purchase again C) make the purchase anyway; make the purchase again D) make the purchase anyway; not make the purchase again E) get widely upset; go psycho

D. make the purchase anayway; not make the purchase again

In applying the cost-benefit principle one should calculate the: A) total cost and total benefit and choose that quantity of an activity where they are equal. B) marginal cost and marginal benefit and choose that quantity of an activity where the marginal benefit exceeds the marginal cost by the greatest amount. C) total cost and total benefit and choose that quantity of an activity where the total cost exceeds the total benefit by the greatest amount. D) marginal cost and marginal benefit and choose that quantity of an activity where the marginal benefit equals the marginal cost. E) marginal cost, total cost, marginal benefit, and marginal cost and choose that quantity of an activity where the marginal cost equals the total cost and the marginal benefit equals the total benefit.

D. marginal cost and marginal benefit and choose that quantity of an activity where the marginal benefit equals the marginal cost.

Decisions that involve doing something or not (like seeing a movie) and decisions that involve choosing a level (square footage of an apartment) are A) completely dissimilar, requiring two different models on how to decide. B) reasonably dissimilar with the cost-benefit principle useful only when deciding on the level. C) similar, requiring a comparison of total benefits and total costs. D) similar, requiring a comparison of marginal benefits and marginal costs. E) dissimilar with coin flipping the preferred mechanism for deciding the yes or no questions.

D. similar, requiring a comparison of marginal benefits and marginal costs.

Steve has estimated that the marginal benefit of studying an additional hour of economics (instead of biology) is an increase of 15 points on the weekly test and the marginal cost is a decrease of 10 points on his weekly biology test. Applying the optimal quantity rule to maximize his test scores, he should: A) not study the additional hour of economics, but rather should study an additional hour of biology. B) study the additional hour of economics, but no more than one additional hour. C) not study the additional hour of economics, but rather should study an additional one-and-one-half hours of biology. D) study the additional hour of economics, plus some additional time studying economics. E) not study economics nor biology.

D. study the additional hour of economics, plus some additional time studying economics

At the very least, Joe Average and Bill Gates are both identically limited by A) their wealth. B) their knowledge. C) the square footage in their homes. D) the 24 hours that comprise a day. E) their influence.

D. the 24 hours that comprise a day

Maria spends her afternoon at the beach, paying $2 to rent a beach umbrella and $10 for food and drinks rather than spending an equal amount of money to go to a movie. The opportunity cost of going to the beach is: A) zero, because the money she spent was for food, drinks and an umbrella rather than to enter the beach. B) the $12 she spent on the umbrella, food and drinks. C) only $2 because she would have spent the money on food and drinks whether or not she went to the beach. D) the movie she missed seeing. E) the movie she missed seeing plus the $12 she spent on the umbrella, food and drinks.

D. the movie she missed seeing

In order to properly ignore opportunity costs, the value of the next-best alternative and therefore all alternatives would have to be A) large and positive. Which B) negative. C) small. D) zero. E) infinite.

D. zero

NEED GRAPH. The net benefit of adding the 10th shirt to one's wardrobe is A) $5. B) $10. C) $15. D) $30. E) $45.

E. $45. (going from the MC to the highest point on 10 shirts on the MB)

If Sally works for 10 hours she can sell 15 insurance contracts, and if she works for 11 hours she can sell 18 insurance contracts. The marginal benefit of the 11th hour of Sally's work equals: A) 18 insurance contracts. B) 15 insurance contracts. C) 33 insurance contracts. D) 1 insurance contract. E) 3 insurance contracts.

E. 3 insurance contracts

NEED SPREADSHEET. Application of the cost-benefit principle would lead one to purchase a __________ computer because __________. A) 900 Mhz; the total benefit exceeds the total cost B) 700 Mhz; the marginal benefit is $500 and the marginal cost is $100 C) 1,000 Mhz; one could play Quake3 really fast. D) 600 Mhz; it is certainly fast enough E) 800 Mhz; the marginal benefits and marginal costs are equal

E. 800 Mhz; the marginal benefits and marginal costs are equal

28. Arthur would be willing to pay someone else to wash his car for $15 but not for $20, suggesting that Arthur's A) reservation price is less than $15. B) benefit of a clean car exceeds $20. C) reservation price is greater than $20. D) benefit of a clean car is less than $15. E) benefit of a clean car is at least $15 but less than $20.

E. benefit of a clean car is at least $15 but less than $20

When economists say there is no such thing as a free lunch, they mean that: A) we must pay money for everything we get. B) it is against the law to accept goods or services without paying for them. C) the more lunch a person eats the more weight the person will gain. D) each day we decide to eat lunch is another day we must pay out money. E) every choice we make involves a tradeoff.

E. every choice we make involves a tradeoff

The principle of scarcity applies to A) the poor exclusively. B) nations exclusively. C) all consumers. D) all firms. E) everyone; consumers, firms, governments, and nations.

E. everyone; consumers, firms, governments, and nations

The cost-benefit principle indicates that an action should be taken A) if the total benefits exceed the total costs. B) based on flipping a coin or speaking with a psychic. C) if the average benefits exceed the average costs. D) if the net benefit (benefit minus cost) is zero. E) if the extra benefit is greater than or equal to the extra costs.

E. if the extra benefit is greater than or equal to the extra costs

Viewing the loss of $10 before a $10 purchase as being different from the loss or destruction of the $10 purchase is A. consistent with rational behavior B. related to income i.e. the wealthy would see it as being the same C. related to income i.e. the poor would see it as being the same D. evidence of the uselessness of economic reasoning E. inconsistent with rational behavior because, in either case, one has experienced a $10 reduction on wealth.

E. inconsistent with rational behavior because, in either case, one has experienced a $10 reduction on wealth.

In general, rational decision making requires one to choose the actions that yield the A) largest total benefit. B) smallest total cost. C) smallest net benefit. D) smallest average cost. E) largest economic surplus.

E. largest economic surplus

For a given question to be considered an economic question, it would need to involve A) explicit prices. B) making a choice. C) a graph. D) limited resources. E) limited resources and making a choice.

E. limited resources and making a choice

Sonya is employed at a stock brokerage firm where she earns $25 per hour. The office she works at is located downtown. To get to work each day, she must either ride a series of buses that takes one-and-a-half hours at a cost of $2, or take a cab that takes 30 minutes and costs $20. The opportunity cost: A) of riding the bus is $2, and taking the cab is $20. B) of riding the bus is $37.50, and taking the cab is $12.50. C) of riding the bus is $35.50, and taking the cab is -$5. D) of riding the bus is $39.50, and taking the cab is $32.50. E) of riding the bus is $27, and taking the cab is $20.

E. of riding the bus is $27 and taking the cab is $20

Which of the following decisions would not be part of microeconomics? A) What college major to select. B) How to make the largest profit. C) Whether to study or watch TV tonight. D) How will an early freeze in California affect the price of fruit. E) Should the federal budget always be balanced.

E. should the federal budget always be balanced