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SCAN0811_000 - Chapter Nine Name Date I Jacquelyn is a...

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Unformatted text preview: Chapter Nine. Name: Date: I. Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college? A) tuition B) textbooks C) the salary that she could have earned working full-time D) computer lab fees 2. Accounting profit differs from economic profit because: A) of differences in the manner in which revenue is calculated. B) economic costs include depreciation, while accounting costs do not. C) accounting costs are generally higher than econornic costs because accounting costs include explicit and implicit costs, While economic costs include only explicit costs. D) economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only. 3. You decide to quit your $60,000 per year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is: A) $15,000. B) $20,000. C) —$40,000. D) ~$45,000. 4. For most firms, economic profit is: A) less than accounting profit. B) equal to accounting profit. C) greater than accounting profit. D) negative. 5. Profit computed using explicit costs as the only measure of costs is: A) explicit profit. B) accounting profit. C) implicit profit. D) economic profit ChapterNine Page] 10. 11. 12. . The costs economists use in the concept of economic profit are: A) accounting costs. B) strictly dollar costs, not opportunity costs. C) opportunity costs, or the value of the best opportunity forgone. D) accounting costs and opportunity costs (i.e., the value of the best opportunity forgone). . Which of the following best describes a “how much” decision? A) Should I drive to work or ride my bicycle? B) Should I rent a movie or watch a baseball game on television? C) Should i attend graduate school or immediately enter the labor force? D) Should I buy a third hot dog? . Profit is the difference between and A) total sales; total revenues B) total profits; total costs C) total revenues; total costs D) marginal costs; marginal revenues . The amount by which an additional unit of an activity increases total benefit is: A) net benefit. B) marginal benefit. C) marginal cost. D) utility. The amount by which an additional unit of an activity increases total cost is: A) net benefit. B) marginal benefit. C) negative benefit. D) marginal cost. According to the optimal output rule, if marginal benefit: A) exceeds marginal cost, an activity should be reduced. B) is less than marginal cost, an activity should be reduced. C) is equal to marginal cost, an activity should be reduced. D) exceeds marginal cost, net benefit is maximized. According to the optimal output rule, if marginal benefit: A) exceeds marginal cost, an activity should be increased. B) is less than marginal cost, an activity should be increased. C) is equal to marginal cost, an activity should be increased. D) exceeds marginal cost, net benefit is maximized. Chapter Nine Page 2 13. 14. 15. 16. I7. 18. According to the optimal output rule, if marginal benefit: A) exceeds marginal cost, an activity should be reduced. B) is less than marginal cost, an activity should be increased. C) is equal to marginal cost, net benefit is maximized. D) exceeds marginal cost, net benefit is maximized. In economics a “marginal” value refers to: A) the value associated with an unimportant, or marginal, activity. B) a value entered as an explanatory item in the margin of a balance sheet or other accounts. C) the value associated with one more unit of an activity. D) a value that is most appropriately identified in a footnote. While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice. You then conclude: A) you will be better off if you eat one more slice. B) you will be no better off and no worse off from eating one more slice. C) you will be worse off if you eat one more slice. D) the total cost of eating the pizza will be more than the total benefit of eating the pizza. Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5 .00. The marginal cost to the customer of the third slice is: A) $4.50. B) $10. C) $1. D) $2. 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: A) wash the tenth car. B) not wash the tenth car. C) increase his marginal benefit. D) There is not enough information to decide. Total net gain is maximized when marginal benefit marginal cost. A) exceeds B) is less than C) is equal to D) approaches Chapter Nine Page 3 19. 20. 21. 22. 23. 24. If the marginal benefit received from a good is equal to the marginal cost of production, then: A) society's well—being cannot be improved by changing production. 8) society's well-being can be improved if production decreases. C) society's well—being can be improved if production increases. D) the market is producing too much of the good. A “how much” decision is best made by comparing: A) the explicit costs of an action to the implicit costs of that action. B) the accounting profit of an action to the economic profit of that action. C) the marginal benefits of an action to the marginal costs of that action. D) the present value of an action to the net present value of that action. Sunk costs: A) are not considered in marginal analysis. B) help to determine the optimal quantity of an activity. C) can dramatically increase marginal costs. D) are the same as variable costs. You receive an email from a firm proposing the following business deal. They will send you $1,000 now, and in exchange you will send them $1,100 in one year. You will just break even from this deal if the interest rate is: A) 12%. B) 4%. C) 6%. D) 10%. The net present value of a project is the difference between: A) current benefits and the present value of future costs. 13) the present value of current benefits and the current value of future costs. C) the present value of future benefits and the present value of future costs. D) the present value of current and future benefits and the present value of current and future costs. The dollar amount of a future payment is its present value. A) exactly the same as 13) approximately the same as C) less than D) greater than Chapter Nine Page 4 ...
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