Microeconomics Chapter 1 Practice Exam; Mississippi State- Randall Campbell

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 à team member in the existing office. Onetime 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: $300,000. $200,000. $500,000. $400,000.

$300,000

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

past decisions you have made

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

resources are limited and cannot satisfy all the ways a society wants to use them.

The study of economics arises because of the necessity of choice, and the necessity of choice arises because of the fundamental problem of: • inefficiency. • equilibrium. • inequity. • scarcity.

scarcity

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

the additional cost of hiring one more worker

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

the value of the next best alternative given up to acquire the good.

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 produce this iPad. A voluntary economic transaction between Juan and Apple __ occur because __ would be better. - will; neither Juan nor Apple - will; both Juan and Apple - will not; only Juan - will not; only Apple

will; both Juan and Apple

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? - The cost is zero—the ticket is free. - $85 - $60 - $55

$85

How is the economic surplus generated by a decision calculated?

It is the total benefits minus total costs arising from the decision.

(Figure: Recliners and Couches) American Signature is a furniture company based in Columbus, Ohio. The graph represents American Signature's production possibility frontier for manufacturing couches and recliners. (Check Google Doc 1 for image) The sales team at American Signature has reported that sales of couches have increased. The company would like to increase manufacturing from 100,000 couches to 200,000 couches. As the company's economist, what is the opportunity cost of producing the 100,000 additional couches? 300,000 recliners 100,000 recliners 300,000 couches 100,000 couches

300,000 recliners

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? - Vincent will not make any tables. - He will produce one table at a cost of $900. - He will produce two tables at a cost of $2,000. - He will produce three tables at a cost of $3,300.

He will produce one table at a cost of $900

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? - Yes, because your economic surplus is $220. - Yes, because your full set of costs is only $540. - No, because the benefit of not having to do it yourself is greater than the cost of the professional. - No, because you can increase your economic surplus if you do it yourself.

Yes, because your economic surplus is $220.

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? * You should rent the set because renting earns $40 worth of economic surplus. * You should rent the set because renting earns $400 worth of economic surplus. * You should buy the set because buying earns $220 worth of economic surplus. * You should buy the set because buying earns $500 worth of economic surplus.

You should buy the set because buying earns $220 worth of economic surplus.

Following the Rational Rule, the maximum economic surplus occurs when: - total benefits equal total costs. - total benefits exceed total costs - marginal benefits equal marginal costs. - marginal benefits exceed marginal costs.

marginal benefits equal marginal costs

The cost-benefit principle evaluates __ costs and benefits, and willingness-to-pay considerations quantify __ costs and benefits. - both monetary and nonmonetary; only nonmonetary - only monetary; both monetary and nonmonetary - only nonmonetary; only monetary - both monetary and nonmonetary; only monetary

both monetary and nonmonetary; only nonmonetary

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? • three • four • five • six

five

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: - her parents' anger if she skips the family trip to Aspen. - her contribution to gas money for the drive to Destin. - the ski lift ticket her parents have already purchased for her. - the hotel costs she will split with her friends in Destin.

the ski lift ticket her parents have already purchased for her.

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 because the benefit to you of taking the Uber is triple the regular cost. You should __ because the benefit of you taking the Uber is __ than the cost. walk; less walk; more take an Uber; less take an Uber; more

walk; less