Core Principles

Which two values should a business owner compare before deciding to hire one more worker? Marginal cost and marginal benefit Sunk cost and willingness to pay Opportunity cost and total revenue Opportunity cost and economic surplus

Marginal cost and marginal benefit

The _____ principle says that decisions about quantities are best made incrementally. opportunity cost interdependence marginal cost-benefit

marginal

If a manager offers a potential employee $45,000, but the employee would be willing to work for $40,000, and the manager will make $65,000 from the work that the employee does, what is the employee's economic surplus? $5,000 $20,000 $25,000 $40,000

$5,000

Charlotte is studying for a psychology exam and an economics exam that are both scheduled for Monday. She would like to study three hours for each exam, but she only has five hours to study, so she must decide whether one exam grade is more important to her than the other. This exemplifies which of the following types of dependency? Dependencies through time Dependencies between your own choices Dependencies between markets Dependencies between people or businesses

Dependencies between your own choices

Which of these best explains why there is no decision that does not have associated costs? Every choice you make involves a financial cost. Every choice you make involves sunk costs. Every choice you make eventually costs you money. Every choice you make causes you to give up doing something else.

Every choice you make causes you to give up doing something else.

Agron is struggling to determine how many hours he should work. Which of these principles should he use first in order to break the issue down into the simpler question, "Should I work one more hour?" The marginal principle The cost-benefit principle The opportunity cost principle The interdependence principle

The marginal principle

Nasser owns a business that produces t-shirts, but he is struggling with the dilemma of how many shirts to produce, so he begins by asking himself if he should produce one more shirt. Which economic principle is exemplified by this situation? The opportunity cost principle The marginal principle The cost-benefit principle The interdependence principle

The marginal principle

You are considering starting a sandwich shop, but are comparing that to the idea of staying at your current job instead. Which economic principle are you taking into account? The interdependence principle The cost-benefit principle The marginal principle The opportunity cost principle

The opportunity cost principle

Which of these best describes when starting a business is a good idea? When opportunity costs are very high since it reflects your big opportunity When financial profits are larger than any sunk costs When financial profits are large enough to offset the cost of the income you forgo When financial profits can be obtained without incurring costs

When financial profits are large enough to offset the cost of the income you forgo

When are out-of-pocket costs also opportunity costs? When the out-of-pocket costs do not exist in the next best alternative. When the out-of-pocket costs exist in the next best alternative. Always. Never.

When the out-of-pocket costs do not exist in the next best alternative.

When someone asks whether they could improve their circumstance with a little more or less of something, they are taking into account the _____ principle. cost-benefit marginal opportunity cost interdependence

marginal

Evie, a receptionist at a car dealership, asks herself the question, "Should I go back to school, or should I continue to work at the dealership?" The fact that she is comparing the idea of going to school with her next best option indicates that she is applying the _____ principle. interdependence marginal cost-benefit opportunity cost

opportunity cost

When someone considers alternatives before making a decision, they are taking into account the _____ principle. interdependence cost-benefit marginal opportunity cost

opportunity cost

The cost-benefit principle says that people should make choices based on _____ of the choice they face, rather than _____. 1. the underlying costs and benefits; how the choice is described 2. the description; the underlying costs and benefits 3. the out-of-pocket costs; the nonfinancial benefits 4. the nonfinancial benefits; the out-of-pocket costs

the underlying costs and benefits; how the choice is described

Which of these would best be described as the foundation of all economic forces? Money Profits Prices Choices

Choices

Matthew has been diagnosed with cancer and doctors estimate that he has roughly 5 months to live. From an economic standpoint, which best explains why Matthew might be more likely than a healthy person to take a risky experimental drug? His sunk costs are more than those of healthy people. His sunk costs are fewer than those of healthy people. His opportunity cost is higher than that of healthy people. His opportunity cost is lower than that of healthy people.

His opportunity cost is lower than that of healthy people.

You have to try to persuade your parents to go to your graduation because your brother's talent show is scheduled for the same time. This BEST exemplifies which of these interdependencies? Dependencies between your own choices Dependencies between markets Dependencies between people Dependencies through time

Dependencies between people

Natasha starts a small software company, but finds it difficult to hire good software developers since she has a very large competitor half a mile away. This is best explained by which of these interdependencies? Dependencies between markets Dependencies between her own choices Dependencies through time Dependencies between people or businesses

Dependencies between people or businesses

Ella talks about how she applies an economic concept into her situation. She actually would enjoy buying a meal for her friend, but the cost-benefit principle tells her that it would be a cost and not a benefit. As an economics student, how would you explain the cost-benefit principle to her? Buying food costs money and there is no benefit to Ella, but only to her friend. Ella has to weigh the cost of food to the chance of getting her money back from a friend. The cost-benefit principle does not apply to this scenario. Ella earns a nonfinancial benefit from the enjoyment of treating her friend.

Ella earns a nonfinancial benefit from the enjoyment of treating her friend.

Tatyana owns a retail store with 24 employees. Because she is not sure whether a 25th employee would improve her economic surplus, she hires another employee and notices that her total costs have increased by $800 and her total revenue has increased by $1,750. Which of these would be the best course of action for Tatyana? Keep the 25th employee and hire another 25 employees Stop hiring more employees Let the 25th employee go Keep the 25th employee and experiment by hiring an additional employee

Keep the 25th employee and experiment by hiring an additional employee

_____ refer(s) to the problem that resources are limited. Sunk costs The rational rule Scarcity The framing effect

Scarcity

Which of these best describes the big idea behind the interdependence principle? 1. What else? 2. Or what? 3. One more? 4. Benefit best cost?

What else?

The framing effect causes people to make decisions based on: how the decisions are described. the motivations of other people. selfish motivations. whatever will maximize their economic surplus.

how the decisions are described.

The _____ forces people to recall that whenever they choose to do something, they are implicitly choosing not to do something else. 1. interdependence principle 2. cost-benefit principle 3. marginal principle 4. opportunity cost principle

opportunity cost principle

There are far fewer stay-at-home moms today than in 1975 in large part because women's wages have _____, causing the opportunity cost of being a stay-at-home mom to _____. risen; rise risen; fall fallen; fall fallen; rise

risen; rise

Amancio is going into his fourth year of school when he is offered a prestigious position at a software company. Instead of applying the opportunity cost principle to see if he should quit school and take the job, he decides to stay in school, because he has already spent so much time and money on furthering his education. Amancio's hasty decision has been negatively affected by: sunk costs. the framing effect. the someone else's shoes technique. scarcity.

sunk costs.