Chapter%206 - Chapter 6 I Multiple-choice Questions 1 A...

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Chapter 6 I. Multiple-choice Questions: 1. A rational seller will sell another unit if A) the profit earned from the sale of the next unit is greater than the profit earned on the sale of the last unit. B) the cost of making the next unit is less than the revenue gained by selling the next unit. C) The quantity demanded of the seller’s output is greater than zero. D) The price that could be charged is greater than the equilibrium price. 2. Your neighbors have asked you to look after their dog while they are on vacation. It will take you one hour per day to feed, walk, and care for the dog, which you can do either before or after you go to work. Your regular job pays $10 per hour, and you can work for up to eight hours per day. Your reservation price for taking care of the neighbor’s dog is A) $10, because that is your opportunity cost of one hour of work. B) $15, because overtime wages are generally equal to 1.5 times your regular wage when you work more than eight hours in one day. C) zero, because your regular job is not available for the ninth hour of work. D) The value of one hour of leisure, which is greater than zero. Use the following to answer questions 3-6: John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7/hr for as many hours as he chooses to work, and cleaning windows for the businesses in downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he cleans a day, as shown in the table below: Cleaning time (hr/day) Total numbers of windows cleaned 0 0 1 7 2 11 3 14 4 16 5 17 3. What is John's hourly opportunity cost of cleaning windows? A) $14 B) $8 C) $7 D) $2 4. Does the 3 rd hour cleaning satisfy the cost-benefit principle?
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A) yes, since he makes $28 B) yes, since the additional amount earned is $14 C) no, since the additional amount earned is $6 D) yes, since the additional amount earned is $6. 5. What is John's reservation price for 4th and 5th hours of cleaning windows?
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This note was uploaded on 03/16/2010 for the course ECON 1 taught by Professor Tang during the Winter '08 term at UCSD.

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Chapter%206 - Chapter 6 I Multiple-choice Questions 1 A...

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