econ chapter 9 homework

(Scenario: Betty's Cookie Shop): Betty's implicit and explicit costs are equal to: Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. A. $204,500. B. $80,000. C. $100,000. D. $184,500.

A. $204,500.

You own a small deli that sells sandwiches, salads, and soup. What factor is an implicit cost of business? A. the job offer you did not accept at a local catering service. B. wages paid to part-time employees. C. your monthly utility bill. D. bread, meat, and vegetables used to produce the items on your menu.

A. The job offer you did not accept at a local catering service.

Which statement is a "how much" decision? A. Tim is trying to decide the amount of money to save each month to buy a new car next year. B. Andrea is trying to decide whether to go to graduate school in economics or go to law school. C. Andy is trying to decide whether to take a prep course for the Law School Admissions Test. D. Mary is trying to decide whether to go to work or go to college after she graduates from high school next month.

A. Tim is trying to decide the amount of money to save each month to buy a new car next year.

(Table: Marginal Benefit of Sweatshirts): The marginal benefit of the second sweatshirt is: A. $29 B. $11 C. $20 D. $9

B. $11

As George ate pizza during one recent outing, he found that he enjoyed each additional slice less and less. This implies that his marginal benefit was: A. vertical. B. decreasing. C. increasing. D. constant.

B. decreasing.

Cindy just graduated from college and started working at a large accounting firm. Although the firm will match her contributions to a retirement account, Cindy wants to wait several years before participating since there are so many things she needs to buy right now. What type of behavior does this represent? A. loss aversion B. misperception of opportunity cost C. mental accounting D. risk aversion

B. misperception of opportunity cost

People are willing to buy insurance because of: A. the status quo. B. risk aversion. C.the miscalculation of opportunity costs. D. bounded rationality.

B. risk aversion.

(Table: Marginal Benefit of Sweatshirts): The marginal benefit of producing the third sweatshirt is: A. $15. B. $16. C. $14. D. $31.

C. $14.

(Table: TC's Pizza Parlor): What is the optimal level of production? A. 5 slices B. 0 slices C. 10 slices D. 20 slices

C. 10 slices

After three years at an expensive college, Pierre realizes that he doesn't want to finish school but has decided to become a chef where one more year of college will have no value to him. When Pierre suggests that he leave college for culinary school, his parents insist that he stay for one more year to get his degree. If nothing else changes in the future, which statement is TRUE? A. Pierre's parents are wrong: the marginal benefit to Pierre of another year of college is greater than the marginal cost of college. B. Pierre's parents are correct: if he leaves college, it is as though he has wasted three years of tuition. C. Pierre's parents are wrong: the marginal benefit to Pierre of another year of college is less than the marginal cost of college. D. It is impossible to tell who is correct.

C. Pierre's parents are wrong: the marginal benefit to Pierre of another year of college is less than the marginal cost of college.

You plan to attend a movie on Saturday night. You buy a ticket for $7 and then lose it. According to marginal analysis, if everything else remains the same, you should: A. go home. B. buy another ticket and attend the movie only if your marginal C. benefit of seeing the movie is more than $14. C. buy another ticket and attend the movie. D. go to the movie only if you can find the lost ticket.

C. buy another ticket and attend the movie.

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents a(n): A. explicit cost. B. sunk cost. C. implicit cost of capital. D. total cost.

C. implicit cost of capital.

The amount by which an additional unit of an activity increases total benefit is: A. net benefit. B. utility. C. marginal benefit. D. marginal cost.

C. marginal benefit.

If the marginal benefit received from consuming a good is equal to the marginal cost of production: A. the market is producing too much of the good. B. society's well-being can be improved if production decreases. C. society's well-being cannot be improved by changing production. D. society's well-being can be improved if production increases.

C. society's well-being cannot be improved by changing production.

(Table: Marginal Analysis of Sweatshirt Production I): The profit at the optimal quantity of sweatshirts is: A. $70 B. $8 C. $45 D. $12

D. $12

(Table: TC's Pizza Parlor): Assume that the marginal benefit is constant in intervals of production. Suppose five slices of pizza are being produced. What is the marginal benefit of producing one more slice of pizza? A. 15 B. $2 C. $55 D. $3

D. $3

(Scenario: Betty's Cookie Shop):Betty is trying to decide at what point she should stop selling cookies, and she knows she cannot change the price of a cookie. She should stop selling cookies if her: Betty runs a cookie shop where she sells cookies for $1 each. She employs five people, each of whom worked a total of 500 hours last year; she paid them $10 per hour. Her costs of equipment and raw materials add up to $75,000. Her business ability is legendary, and other companies have offered to pay Betty $100,000 to come to work for them. She also knows she could sell her cookie shop for $150,000. The bank in town pays an annual interest rate of 3% on all funds deposited with it. A. economic profit is positive. B. explicit and implicit costs are less than her revenues. C. economic profit is equal to her accounting profit. D. implicit costs are greater than her accounting profits.

D. implicit costs are greater than her accounting profits.

If marginal costs of production are greater than marginal benefits of production: A. costs will eventually decrease. B. more of the good should be produced. C. not all costs are being considered. D. too much of the good is being produced.

D. too much of the good is being produced.