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Exam 9: Decision Making by Individuals and Firms

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Question 71

Multiple Choice

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A person with loss aversion:

A) has a hard time recognizing losing investments and moving on.
B) is likely to maximize total revenue rather than profit.
C) is unlikely to ignore sunk costs.
D) is more likely to use a credit card than to pay cash.

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Question 72

Multiple Choice

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The willingness to sacrifice some economic payoff to avoid a potential loss is:

A) irrational behavior.
B) bounded rationality.
C) the result of a concern about fairness.
D) risk aversion.

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Question 73

Multiple Choice

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In general,when marginal benefit is greater than marginal cost,the decision maker should do _____ of the activity.

The _____ benefit is the amount by which an additional unit of an activity increases its total benefit.

If the marginal cost of any activity is constant at $4,then at the optimal quantity of the activity,the marginal benefit will be $4.

Accountants use only _____ costs in their computations of short-run total cost.

Suppose Bob has a part-time business washing cars.He has washed nine cars on a given day;the marginal benefit of washing the tenth car is $20 and the marginal cost is $12.Bob should:

Lucy bought some stock 10 years ago that has been priced at half of her purchase price for the past 5 years.However,Lucy refuses to sell the stock,thinking that,if she waits long enough,she will recover her investment.What type of behavior does this represent?

If the marginal benefit received from consuming a good is equal to the marginal cost of production:

Expenses associated with factors of production may be _____ costs.

Marginal analysis should be used in "either-or" decisions.

If the accounting profit for a firm is negative,the:

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:

Use the following to answer question: -(Table: Marginal Benefit of Sweatshirts) Use Table: Marginal Benefit of Sweatshirts.The marginal benefit of producing the second sweatshirt is:

Use the following to answer question: -(Table: TC's Pizza Parlor) Use Table: TC's Pizza Parlor.Assume that marginal cost is constant in the intervals of production.The marginal cost for pizza production:

Costs that are included in the economic concept of cost but that are NOT explicit costs are:

An "either-or" decision entails:

Profit computed without implicit costs is _____ profit.

Mary goes ahead and buys a new car because she expects to receive a 10% increase in her salary next year.What type of behavior does this BEST represent?

Use the following to answer question: -(Figure: The Marginal Benefit Curve) Use Figure: The Marginal Benefit Curve.The total benefit of mowing six lawns is approximately: