Econ Exam 1
Rational people make decisions "at the margin" by comparing
. additional costs and benefits
Cole is refinishing an antique china cabinet and has already spent $180 on the restoration. He expects to be able to sell the cabinet for $360. Cole discovers that he needs to do an additional $200 worth of work to make the cabinet worth $360 to potential buyers. He could also sell the cabinet now, without completing the additional work, for $100. What should Cole do?
He should complete the additional work and sell the cabinet for $360.
Bill is restoring a car and has already spent $4000 on the restoration. He expects to be able to sell the car for $6200. Bill discovers that he needs to do an additional $2400 of work to make the car worth $6200 to potential buyers. He could also sell the car now, without completing the additional work, for $3800. What should he do?
It does not matter if Bill sells the car now or completes the work and then sells it at the higher price because the outcome will be the same either way.
After much consideration, you have chosen Cancun over Ft. Lauderdale as your Spring Break destination this year. However, Spring Break is still months away, and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
The marginal cost of going to Ft. Lauderdale decreases.
Acme Home Builders, Inc., has built 24 houses so far this year at a total cost to the company of $4.80 million. If the company builds a 25th house, its total cost will increase to $5.05 million. Which of the following statements is correct?
The marginal cost of the 25th house, if it is built, will equal $250,000.
Suppose the cost of flying a 200 seat plane for an airline is $100,000 and there are 10 empty seats on a flight. The airline should sell a ticket to a standby passenger only if the passenger is willing to pay
This cannot be determined from the information given.
College-age athletes who drop out of college to play professional sports
are well aware that their opportunity cost of attending college is very high.
Suppose your management professor has been offered a corporate job with a 30 percent pay increase. He has decided to take the job. For him, the marginal
benefit of leaving was greater than the marginal cost.
Ashley eats two bananas during a particular day. The marginal benefit she enjoys from eating the second banana
can be thought of as the total benefit Ashley enjoys by eating two bananas minus the total benefit she would have enjoyed by eating just the first banana
demand curve shows
how much of a good a buyer is willing and able to buy at each possible price
a decrease in the price of a good would
increase the quantity demanded of the good
At the equilibrium
marginal benet is equal to marginal cost
Suppose the cost of operating a 75 room hotel for a night is $6,000 and there are 5 empty rooms for tonight. If the marginal cost of operating one room for one night is $40, the hotel manager should rent one of the empty rooms only if a customer is willing to pay
more than $40, as the marginal benefit will exceed the marginal cost.
The term price takers refers to buyers and sellers in
perfectly competitive markets.
Suppose the cost of flying a 200 seat plane for an airline is $100,000 and there are 10 empty seats on a flight. If the marginal cost of flying a passenger is $200 and a standby passenger is willing to pay $300, the airline should
sell the ticket because the marginal benefit exceeds the marginal cost.
Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as
the law of demand.
rational decisionmaker takes an action if and only if
the marginal benefit of the action exceeds the marginal cost of the action.
The marginal benefit Kyra gets from eating a second sandwich is
the total benefit Kyra gets from eating two sandwiches minus the total benefit she gets from eating one sandwich.
The marginal benet Claire gets from purchasing a third pair of ip-ops is
the total benet Claire gets from purchasing three pairs of ip-ops minus the total benet she gets from purchasing two pairs of ip-ops.
The marginal benet Colin gets from eating a fourth slice of pizza is
the total benet Colin gets from eating four slices of pizza minus the total benet Colin gets from eating three slices of pizza.
the marginal benet Colin gets from eating a fourth slice of pizza is 5 out of 5 points
the total benet Colin gets from eating four slices of pizza minus the total benet Colin gets from eating three slices of pizza.
