Midterm 2
The price of Cracker Jacks (a caramel-coated popcorn with peanuts) is $0.50 per box, and the price of macadamia nuts is $0.25 per bag. You have $10 to spend. You decide to purchase 8 bags of macadamia nuts. The maximum number of boxes of Cracker Jacks that you can purchase is:
16
The utility-maximizing principle of marginal analysis implies that, if Katerina maximizes her utility by spending all of her income on Lakers tickets and Uber rides, with prices equal to PTickets and PRides , respectively, then it must be the case that:
MUTickets/PTicket = MURides /PRides.
For a perfectly competitive firm in the short run, if the firm produces the quantity at which _____, the firm is earning _____.
P> ATC; economic profits
When deciding how much to work you must decide how much you value your leisure time and how much you want to consume (have to make money to buy things). The __________ effect says that if you get paid more you'll work more because your time is more valuable and the ___________ effect says if you get paid more you'll work less because you are now wealthier so leisure is more attractive.
Substitution, Income
A firm is deciding how many workers to higher. The manager, Maggi, took some economics courses at college and remembers that firms should follow a rule to choose the optimal number of workers. She asks for your help and you tell her that she should hire workers if:
Wage = Value of MPL.
When making a profit-maximizing "how much" decision, if the marginal benefit of a good or activity is greater than the marginal cost of that good or activity, then the individual can be made better off by:
increasing the quantity as long as the marginal benefit of one more unit exceeds the marginal cost.
Total profit is maximized when marginal benefit _____ marginal cost
is equal to
Suppose that Wendy gets 15 units of utility from one muffin and 23 units of utility from two muffins. The principle of diminishing marginal utility implies that Wendy's total utility from three muffins will be _____ units of utility
less than 31
Jacob owns a bed and breakfast in Napa Valley. He pays $32,000 per year for insurance, $408,000 in wages, and $23,000 for supplies. He forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic _____ equaled _____.
losses; $35,000
The purpose of behavioral economics is to determine why:
people make decisions that appear to be irrational.
A(n) ______ decision maker is willing to sacrifice some economic payoff to avoid a potential loss.
risk averse
India exports shirts, which are labor-intensive, to the United States. The likely source of India's comparative advantage in shirts is:
that, in comparison with the United States, India is a labor-abundant country.
