Midterm Econ 2301 Study Guide

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 a team member in the existing office. One-time 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: ReplyForwardAdd reaction

$300,000

Assume that the economy produces only barrels of oil. What is the growth rate of real GDP for this year? Barrels of oil sold Actual price Last year 80,000 $60 This year 83,000 $63

$5,104,500

A friend comes up to you and offers you a free ticket to a dodger's fame 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 of you attending the game?

$85

Based on the statistics in the table, how much are net exports? Consumption $13.313 trillion Investment $3.371 trillion Government spending $3.412 trillion Exports $2.357 trillion Imports $2.932 trillion

-$0.575 trillion

The growth rate of per capita real GDP from 2016 to 2019 was: Year Nominal GDP Price level Population 2016 $3,000 100 5 2019 $8,000 200 10

-33%

Use Table: Pizza Economy II. Real GDP between 2018 and 2019 grew at a rate of: 2018 units of output per unit 2019 units of output per unit Gino's Pizza 4,000 $10 4,000 $8 Bee's Spaghetti 3,000 $9 1,000 $6 Claudia's Cookies 2,000 $6 1,000 $1 Andre's Salad 5,000 $7 2,000 $4

-60.34%

Marius and Jennifer are going to sell cupcakes and muffins at their annual fundraiser bake sale. In one day, Marcus can make 40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. What is Marius's opportunity cost of producing one cupcake?

0.5 muffin

Janie must give up the production of 75 ties to produce 25 additional dress shirts. The opportunity cost of producing four dress shirts is ____ ties.

12

According to the rule of 70, if GDP per person is growing at a rate of roughly 4%, approximately how many years will it take for average income to double?

18 years

Jamie must give up the production of 100 ties to produce 50 additional sweaters. The opportunity cost of producing four ties is ___ sweater(s).

2

Assume that the economy produces only barrels of oil. What is the growth rate of real GDP between the two years? Barrels of oil sold Actual price Last year 80,000 $60 This year 83,000 $63

3.75% 80,000 x 60= 4,800,000 83,000 x 60= 4,980,000 (4980000/4800000) -1 = 0.0375 or 3.75%

International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A keeps one location open with certainty. Plan B has a one-in-three chance of saving all three locations but a two-in-three chance of saving no locations. The second consultant also offers two plans. Plan C will result in losing two locations with certainty. Plan D has a two-in-three chance of losing all locations but a one-in-three chance of losing no locations. If the franchisee chooses Plan A, she should also choose Plan:

C

(Table: Shrimps and Banana Production Possibilities) Use Table: Shrimps and Banana Production Possibilities. The table shows the maximum number of shrimps and bananas that Issa and Lawrence can produce if they produce only one good. In the absence of trade, Issa produces and consumes nine shrimps and two bananas, and Lawrence produces and consumes three shrimps and two bananas. Now they decide to engage in trade. Which statement is INCORRECT? Shrimps and Bananas Production Possibilities Shrimps Bananas Issa 12 8 Lawrence 5 5 For each individual, the consumption point after trade will lie outside that individual's production possibility frontier.

For both to become better off, each should specialize in the production of some good. However, since Lawrence is equally productive in both goods, it doesn't matter which good each specializes in.

Jamali used to take a bus across the state a few times a year to visit her cousin, but recently, she has been spending more to take faster and more comfortable Amtrak trains. What MOST likely caused this change in her behavior?

Jamali's income rose

If they spend all nigh writing poems, Letica can write 10 poems, and Isabell can write 5. If they spend all night making necklaces, Letica can make 6, and Isabella can make 4. We know that:

Letica's opportunity cost of writing poems is less than Isabella's.

International House of Pancakes (IHOP) is a U.S.-based multinational restaurant chain that specializes in breakfast food. Due to declining sales, an IHOP franchisee must consider closing up to three of her least profitable locations. She meets with two consultants to discuss potential plans. The first consultant offers two plans. Plan A will result in losing two locations with certainty. Plan B has a two-in-three chance of losing all locations but a one-in-three chance of losing no locations. The second consultant also offers two plans. Plan C keeps one location open with certainty. Plan D has a one-in-three chance of saving all three locations but a two-in-three chance of saving no locations. If the franchisee applies the cost-benefit principle, which combination of plans reflects a consistent decision?

Plan C and Plan A

Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is rising because of Organization of Petroleum Exporting Countries (OPEC) restrictions. You are also aware that the number of drivers is rising. Knowing this, you predict that the price of gasoline ____, and the quantity of gasoline bought and sold will ___.

Rise; rise or fall

According to the Office of the United States Trade Representative, a few years back, the United States exported $35.7 billion worth of aircraft to the European Union and imported $3.2 billion worth of essential oils from the region. Which is LEAST likely about these exchanges?

Since the European Union imported more than the United States, only the European Union experiences gains from trade.

Farmers in the United States produce 4.4 billion bushels of soybeaus in one year; farmers in Mexico could produce the same amount of soybeans in two years. Mexican farmers produce 2.4 million metric tons of avocados per year; it would take U.S. farmers three years to grow the same amount of avocados. Which statement is FALSE?

The United States' opportunity cost of producing soybeans is 3.

What happens to the equilibrium price and quantity when demand decreases at the same time supply increases, but the relative size of the shifts is not known?

The equilibrium price falls, and the change in the equilibrium quantity is ambiguous.

What happens to the equilibrium price and quantity when demand decrease and simultaneously supply increases, and the demand shift is smaller than the supply shift?

The equilibrium price falls, and the equilibrium quantity rises.

What happens to the equilibrium price and quantity when demand increases and simultaneously supply decreases, and the relative size of the shifts is not known?

The equilibrium price rises, and the change in the equilibrium quantity is ambiguous.

What happens to the equilibrium price and equilibrium quantity when demand and supply increase simultaneously, but the relative size of the shifts are not known?

The equilibrium quantity rises, and the change in the equilibrium price is ambiguous.

Marcus is an economics major who just landed a job at an advertising agency, where he must determine how well the company's ad campaigns are working. Which BEST describes the result of a successful advertising campaign?

The market demand curve shifts to the right, and the extra sales revenue covers the cost of the campaign

According to the Harvard Business Review, BP, an oil and gas company, created an internal market in which the head of each unit could buy and sell emissions permits, rather than setting target emissions levels with a top-down approach. Each permit allowed a unit to produce a certain amount of emissions. If the unit could reduce emissions, it could sell its permit to another unit that needed one. As a result, BP reduced its emissions nine years in advance of its target goal. Which statement is FALSE?

The price of an emissions permit was irrelevant to each unit's Individual emissions reduction.

For you, Thai food and Indian food are normal goods. Which event would NOT shift your individual demand curve for Thai food to the right?

The prices Indian restaurants charge fall

An investor is franchising a new type of fitness studio. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $1,500 per month each. Additional operating costs, including rent and utilities, will be $5,000 per month at each location. The investor projects that after the business gains traction, the first location will have 1,100 members. The second location will bring in 900 members. The third and fourth locations will bring in 400 and 200 members, respectively. The monthly membership fee will be $50 per member. However, looking at the most recent population data, the investor learns that the city's population growth rate is declining. This change in expectations about the future decreases their membership forecast by 200 members for each potential location. How does this change in expectations change the investor's franchising decision?

They will franchise two locations instead of three

A seller at a farmer's market was $10 for a bag of 10 apple. You think his price is too high, so you counter with an offer of $6 for the bag. The seller then offers you a much smaller bag of five apples for $6. You bargain again, and the seller lets you buy the 10 apples for $8. This scenario is an example of:

a market in action

Hershey's Kit Kat candy bars are cheaper than usual. This could be because there is:

a surplus of Kit Kats

Cornell can type reports faster and more accurately than Alice, so Cornell has a ___ in typing reports.

absolute advantage

The cost-benefit principle will lead you to make unselfish decisions if you:

account for unselfish motivations

Because prices _____, they provide useful business intelligence

aggregate information

The table lists hours that it will take four individuals to clean out a garage and to trim a property's hedges. Clean out a garage Trim the hedges Alberto 4 2 Beatrice 6 2 Clarisse 8 3 Dreshal 9 4 Who has a comparative advantage in cleaning out the garage?

alberto

The person who can produce a product using the fewest inputs has ___ in that product.

an absolute advantage

Real GDP per capita is:

an incomplete measure of a company's standard of living

Nissan manufactures sedans and pickup trucks. As one of Nissan's economists, you're in charge of ensuring efficient management of costs. In the past, if Nissan devoted all of its resources to manufacturing sedans, it could produce 480,000 sedans per year at one manufacturing plant. If Nissan devoted all of its resources to manufacturing trucks, it could produce 240,000 trucks per year. A new production technique now allows Nissan to produce either 600,000 sedans or 360,000 trucks per year. How would Nissan's production possibilities frontier reflect this new production technique?

an outward shift of the production possibilities frontier

Ang can mow the lawn in two hours. Bill takes three hours to mow the same lawn. What can you conclude from this information?

ang has a absolute

harry is an engineering student taking an economics elective in his senior year. He has the option after college to work as a petroleum engineer or design rollercoasters. He is using concepts from his economics to help with this decision. Ny considering the effects that reduced financial investments in petroleum companies will have on his expected salary, he is acknowledging the dependence that exist:

between markets

Your favorite fast-food franchise installs touch-screen kiosks for customers to place orders. This enables the restaurant to employ fewer cashiers to take orders, bit it must hire a skilled technician to maintain the new kiosk. These changes suggest that:

cashiers and kiosk are substitutes, and skilled technicians and kiosks are complements

Specialization will increase output when it is based on:

comparative advantage

What is the basis of specialization?

comparative advantage

When your employees receive work assignments based on who has the lowest opportunity cost in performing each task, the basic for the work assignments is:

comparative advantage

GDP may be calculated as the sum of:

consumer spending, investment spending, government purchases of goods and services, and exports minus imports

The marginal principle breaks quantity decisions into iterative decisions that use the:

cost-benefit principle

When price functions as a message, it:

creates a line of communication between buyers and sellers

The 'market value' of a good or service refer to the:

current dollar value of that good or service

As the president for her school's student government association, the school faculty has tasked your younger sister with marketing an upcoming school event. The primary duties are drafting an email, writing a blog, and designing a poster. Two students, experienced in the tasks, and whose final product for each task is expected to be about the same, will help her. She calls you for help in determining the best way to allocate each task. Which step should she take first?

determine how long each task would take each person

Including intermediate goods in calculations of GDP is:

double counting

According to the interdependence principle, when faced with a decision, you should ask what:

else might my decision affect and what else might affect my decision

Trade can be beneficial to trading partners because it:

enables more goods and services to be obtained at a lower opportunity cost.

When price functions as a incentive, it:

encourages buyers and sellers to change the quantity they buy and sell

The circular flow of income shows that total spending is ___ total income

equal to

The market for yogurt is initially in equilibrium. Yogurt producers successfully advertise to encourage yogurt consumption. At the same time, yogurt producers exit the market. Standard demand and supply analysis tells us that the:

equilibrium price of yogurt will rise, but we cannot determine how the equilibrium quantity will be affected.

The rule of 70 is a simple rule of thumb for:

evaluating long-term growth rates

The problem of determining what goods and services society should produce :

exists because there are not enough resources to provide all the goods and services that people want

If we add together consumer spending on goods and services, investment spending, government purchases of goods and services, and the value of export, then subtract the value of imports, we have measured the nation's:

gross domestic product

In the U.S. economy, the circular flow diagram does NOT illustrate:

growing income inequality

Economic growth per capita economic growth is:

growth per person

If you need to make a decision and all the information needed to make a good decision is not available, then you:

have a knowledge problem

Actress Mayim Bialik holds a doctorate in neuroscience from UCLA. Bialik, a former main character on the TV show The Big Bang Theory, earned hundreds f thousands of dollars per episode, and later became the host of the TV show Jeopardy. Why does Bialik work in the television industry instead of neuroscience?

her opportunity cost to work in a neuroscientist if high

In the circular flow diagram, a person or a group of people who share their income is a:

household

You and your friend are discussing your philosophies on life and policies. Your friend says that for a career, everyone should always do what they're best at. You add the distinction that because of comparative advantage, it's efficient when people do what they're best at:

if it's also what they're comparatively the least bad at

You and your friend are discussing your philosophies on life and policies. Your friend says that it's always better to do all home improvement project yourself, rather than hiring someone, because doing it yourself is always cheaper. You add the distinction that:

if your opportunity cost is high, hiring someone could make you better off.

When sellers and buyers adjust the quantities supplied and demanded in response to a price change, price is functioning as:

incentive

Suppose a technological improvement lowers the cost of producing guava candy. At the same time, preferences for guava candy decrease. The equilibrium quantity of guava candy will:

increase, decrease, or remain the same, depending on the relative magnitudes of the shifts of the demand supply.

If steak is a normal good, when incomes rise, the equilibrium price will ___,and the equilibrium quantity will ___.

increase; decrease

An increase in demand and an increase in supply will lead to an ___ in the equilibrium quantity and an ___int the equilibrium price.

increase; indeterminate change

Although the trade deficit and the negative of net exports are not exactly the same thing, they closely track each other. Consider the data in the table. In absolute numbers, the trade deficit has ____. As a percentage of GDP, the trade deficit has ____. Last year This year Exports $2.3 trillion $2.6 trillion Imports $2.9 trillion $3.3 trillion GDP $17.4 trillion $21.5 trillion

increased; decreased

A decrease in demand and an increase in supply will lead to an ____ in the equilibrium quantity and an ____ in the equilibrium price.

indeterminate change; decrease

The topics studied in macroeconomic include:

inflation

The topics studied in macroeconomics include:

inflation, unemployment, and economic growth

Asking "What else?" allows the ___ principle to be boiled down to a simple question.

interdependence

According to the Harvard Business Review, BP, an oil and gas company, created a system in which the head of each unit could buy and sell emissions permits, rather than setting target emissions levels with a top-down approach. Each permit allowed a unit to produce a certain amount of emissions. If the unit could reduce emissions, it could sell its permit to another unit that needed one. As a result, BP reduced its emissions nine years in advance of its target goal. Which is the term for the system that BP utilized to achieve this?

internal market

Which is TRUE when the price is functioning as a message?

it communicates information to buyers and sellers

How is the economic surplus generated by a decision calculated?

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

When you assign tasks to employees based on comparative advantage, the tasks go to those with the:

lowest opportunity cost

Asking "One more"? allows the ___ principle to be analyzed as a simple question

marginal

What institution allows people to trade with others who have different comparative advantages without meeting them or communicating directly with them?

markets

Although you mostly prefer to make home-cooked meals, you order take-out a couple times a week. However, during the week prior to midterm and final exams, you order Uber Eats every day. Why?

markets allow you to trade tasks and spend less time doing things with high opportunity costs

Perdue supplies processed chicken to grocery stores and restaurants. The price of organic chicken is rising, and the price of conventional chicken has fallen slightly. Perdue analysts conclude that consumers are finding organic chicken increasingly more valuable. For perdue, price acted as a

message

When price changes act as a line of communication between buyers and seller, price is functioning as an:

message

When price functions as a communication line between buyers and sellers around the world, it is functioning as a

message

Helena works in a factory that makes plastic phone cases. The four main tasks are mixing, molding, curing, and polishing. Of all the worker, she is the fastest mixer, has the lowest opportunity cost for molding; is the most careful in curing, and enjoys polishing. If her manager makes assignments in a way that maximizes output, then Helena will be assigned to:

molding

Graphically, the equilibrium quantity is the:

quantity corresponding to the intersection of the demand and supply curves

An equilibrium price is a price where the:

quantity supplied equals the quantity demanded

When faced with a quantity decision, the economic surplus is always maximized by following the:

rational rule

Sunk costs are costs that are incurred:

regardless of which decision is made

Opportunity cost arise from the fundamental economic problem of:

scarcity

Internal markets, which are markets that managers set up within their organization, are:

set up to allocate resources of a company more efficiently, often not using real money

Gabriella starts using a new baking technique, and she can now do twice as much of everything. In a single day, Gabriella can now bake 10 muffins or 8 cookies, rather than the 5 muffins and 4 cookies she could previously bake. Gabriella's production possibility frontier has ___ and her opportunity cost of making cookies ___.

shifted right; is unchanged

Which would MOST likely be a microeconomic question?

should I go to business school or take a job?

Comparative advantage explains why people:

specialize and trade

Whenever a good is purchased:

the cost of the good is the opportunity cost

Which item should not be included in GDP?

the dollar value of a repair job done by your cousin on her own car

A knowledge problem exists when.

the information needed to make a good decision is not available to a decision maker

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 $1,200 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 $320 per month to work some of the hours you normally work, while you manage the campaign. If you hire the professional, your total benefit would be all the money you avoid spending on doing the campaign yourself. What is the total benefit of hiring the professional?

$1,160

Use Table: Real and Nominal Output. Based on prices 3 and 4, real output in year 4 is: Year Units of Output Price per unit 1 40 $1 2 30 $2 3 50 $2 4 70 $4 5 60 $6 6 60 $8

$210

Assume that the economy produces only textbooks. What is the real GDP for last year? Textbooks sold Actual price Last year 5,000 $50 This year 5,250 $55

$262,250 5250 x 50= 262,500

Use table: Measuring GDP, Total expenditures on GDP by the household sector are: Personal consumption expenditures: $600 Gross private domestic investment 200 Net exports -5 State and local government purchases of goods and services 200 Federal government purchases of goods and services 100 Imports 15

$600 billion

As the manager of a farm-to-table restaurant, Carlos sets the prices of entrees each day. Today, his restaurant sold out of avocado toast during brunch service, so he had to recommend to some avocado toast aficionados the goat cheese radish tartine with micro greens. Which price did he MOST likely set for avocado toast? Price Quantity Demanded Quantity Supplied $15.00 4 40 $13.00 8 32 $11.00 12 24 $9.00 16 16 $7.00 20 8

$7.00

Marius and Jennifer are going to sell cupcakes and muffins at their annual fundraiser bake sale. In one day, Marius can make40 cupcakes or 20 muffins, and Jennifer can make 15 cupcakes or 15 muffins. With specialization. ___ cupcakes and ___ muffins will be made in one day.

40;15

Assume that the economy produces only frozen fish. What is the growth rate of real GDP between the two years? Tons of total fish Actual price Last year 100 $1,800 This year 105 $1,850

5% Real GDP for last year (100x1,800)= 180,000 Real GDP for this year (105 x 1,800)= 189,000 ((189,000-180,000)/180,000) x 100%= 5%

You and your colleague are sales representatives. The table displays the number of minutes it takes you to perform your primary tasks. Dividing work based on comparative advantage, you and your colleague place ___ total call and process ___ total applications in an hour. Place a phone call Process an application You 7 11 Your Colleague 5 13

8:4

Stock in a company is:

A share of ownership in a company

In markets, price provide all of these EXCEPT:

productivity

Which equation breaks GDP down into the four sources of aggregate spending?

GDP= C+I+G+X-IM

If they bake only muffins, in a single day Gregory can bake 10 muffins, and Gabriella can bake 5 muffins. If they bake only cookies, in a single day Gregory can bake 10 cookies, and Gabriella can bake 4 cookies. We know that ___has an absolute advantage and a comparative advantage in baking ___.

Gregory; cookies

An investor is franchising a new type of fitness studio that will be the first in the city and must determine how many locations to open. For each location, they will hire a manager for a salary of $4,000 per month and two part-time employees who will earn $2,000 each per month. The investor values their time spent overseeing each location at $7,500 per month. Additional operating costs, including rent and utilities, will be $6,000 per month at each location. The investor projects that when the business gains traction, the first location will have 1,000 members. The second location will bring in 900 members. The third and fourth locations will bring in 300 and 200 members, respectively. The monthly membership fee will be $70 per member: The investor has decided to definitely open two locations. Should they open a third location?

No, because marginal cost would exceed marginal benefit

___ is assessed by asking: " What is the ___ I am willing to pay to get this benefit, or avoid that cost?"

Willingness to pay; most

A laptop computer purchased by a private individual for personal use is:

consumer spending

The Rational Rule summarizes the marginal principle. It says that is something is worth doing, keep doing it until your marginal:

benefits equal your marginal costs

Decisions made about quantities are:

best made using the marginal principle

The principle of comparative advantage applies to interactions:

between people as well as in business production decisions.

GDP is the total dollar value of all:

final goods and services produced in the economy in a given period

Carla and June are team leaders at a construction company. The table displays the number of months their teams need to build two types of projects. Single- family home Commercial retail space Carla's team 3 6 June's team 4 5 How many single-family homes will be built in 15 months with specialization?

five

Households do NOT include income from:

imports

Nerida can either commute to work using a bus or purchase a new car. The bus fare each way is $2. Nerida works five days a week for 50 weeks a year. Based solely on the benefit of avoiding the cost of her bus tickets, Nerida should purchase a car if the cost of the car is ___than ____per week.

less; $20

Adlai decides to upgrade to a new electric-assisted bicycle that is better suited to his commute to work. He sells his old mountain bike to Malachi, who pays Adlai $100 for it. When they complete the transaction:

they are both better off

If resources are scarce:

they are insufficient to provide enough goods and services to satisfy all human wants and needs

Carla and June are team leaders at a construction company. Carla's team can build a single-family home in 3 months and a commercial retail space in 6 months. June's team builds a single-family home in 4 months and a commercial retail space in 5 months. How many commercial retail spaces will be built in 15 months with specialization?

three

Suppose we observe an increase in both the price of ping pong tables and quantity of ping pong table bought and sold. Which statement would explain this observation?

An increase in the demand for ping pong tables

When there is a shortage of highly skilled workers in a particular region:

highly skilled workers can negotiate higher salaries

You own a food truck, and you've been operating in the parking lot of your friend's business. You pay your friend $900 per month to park at their business, and your food truck revenue is $6,000 per month. You're considering whether you should continue to park in your friend's lot or move to another location. Your revenue in the new location would be $10,500 per month, but you'd have to pay $1,500 per month to park there. You would also have to buy more fresh ingredients to meet the increased sales, so your monthly operating costs would increase by $600. If you choose to keep parking in your friend's lot, are you correctly applying the cost-benefit principle?

No, because you could increase your economic surplus by moving to the new location.

Markets allocate:

Resources, goods, and services

You're conducting pricing research for Apple regarding the iPad. Which statement about the roles of prices is FALSE?

The price provides information about specific exchanges only, rather than an aggregate summary.

Economists use money equivalents to compare costs and benefits because money is:

a common measuring stick

Which item is NOT included in the calculation of GDP?

a monthly social security payment

The cost-benefit principle evaluates ___ costs and benefits, and willingness-to-pay consideration quantity___ costs and benefits

both monetary and nonmonetary; only nonmonetary

You have an absolute advantage in producing a product if you:

can produce the product using the fewest inputs

When we refer to price as a message, this means that price:

communicates information

Decisions should reflect the ___ costs, rather than just the ___ costs.

opportunity; financial

Equilibrium is the:

point at which there is no tendency for change

Markets whose payoffs are linked to whether an uncertain event occurs are called ___ markets.

prediction

Price in wheat futures markets provide:

predictions of future price of wheat

We expect that price will fall when:

the quantity supplied is greater than the quantity demanded.

We have to make choices because

the resources available to us are limited

Which best describes GDP?

the total market value of all final goods and services produced in the economy during a given year

The cost of sensors used in making radio frequency identification (RFID) chips falls, and a successful ad campaign makes using "tap" technology in credit card usage more fashionable. As a result, the equilibrium price of RFID chips ____, and the equilibrium quantity ____.

May decrease, decrease, or stay the same; increases.

Jeni is deciding the direction she wants to take her business, Jeni's ice cream, over the course of the next year. She could develop a new flavor of ice cream to sell in the grocery stores, or she could open a new company owned location. The cost of research, development, and bringing the new flavor to market would be $200,000. Jen spent $75,000 developing the first new flavor profile, which was unsuccessful. If she doesn't develop the new flavor, the start-up cost for the new store location would be $50,000. Over the course of the next year, operating cost for already existing locations will be $100,000. What is Jeni's opportunity cost of developing a new ice cream flavor?

$150,000

What happens to the equilibrium price and equilibrium quantity when demand and supply decrease simultaneously, but the relative size of the shifts are not known?

The equilibrium falls, and the change in equilibrium price is ambiguous.

Blake has successfully launched a massage therapy business, but he now receives more requests for bookings than his availability. He must determine how many new therapists to hire. Blake currently provides 15 total weekly massages. Hiring the first therapist would bring the total to 40 massages per week. Adding a second therapist will result in 60 total massages per week. The third and fourth therapists will result in 75 and 80 total weekly massages. A client pays $120 for a massage, and Blake pays therapists $1,000 per week. How many therapists should Blake add to his team?

three

You are considering a beach trip for spring break. Which event would shift your individual demand curve for a room near the beach to the right?

to reward you for a successful semester, your family gives you money for spring break

Transfer payments are payments that:

transfer income from one person to another

The price of coffee at a local coffee shop is $3. Cheryl is willing to pay $6 for her first cup a coffee each day. The marginal benefit to her of each additional cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?

two

Ralph is offered a free ticket to a Yankees game-- a ticket he cannot resell. His opportunity cost of going to the baseball game is:

whatever Ralph would have done had he not gone to the game

A new Subway location has offered a prize a free meal (valued at $5) each week for a year- to its first 100 customers on opening day. Isabella camped out for 48 hours before the opening to be one of the first 100 customers and successfully obtained the prize. The cost to Isabella of obtaining the "free meal a week for a year" prize was:

whatever else she would have done with 48 hours

Emma spends $40,000 for one year's attendance at university. The opportunity cost of one year at university for Emma is:

whatever she would have purchases with the $40,000 plus whatever she would have earned had she not attended university

The marginal principle helps individuals decide:

whether to do a bit more of an activity or a bit less of it

economists convert costs and benefits into money equivalents by evaluating an individual's:

willingness to pay

When you participate in a market transaction,

you and your trading partner both give something of value to the other

You can spend $300 on either pair of new Air Jordan sneakers or a new skateboard. If you choose to buy the Air Jordans, the opportunity cost is:

your enjoyment of the new skateboard