# 1 a 75 2 b 125 3 c 200 4 d 300 answer c diff 2 page

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1. A) \$75 2. B) \$125 3. C) \$200 4. D) \$300 Answer: C
Diff: 2 Page Ref: 7/7 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytical thinking 46) Zane’s Vanes is a service that restores old weather vanes. Zane has just spent \$125 purchasing a 1920s-era weather vane which he expects to restore and sell for \$500 once the work is completed. After having spent \$125, Zane realizes that he will need to spend an additional \$200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for \$200. What is his marginal cost to complete the restoration?
Diff: 2 Page Ref: 7/7 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytical thinking 47) Zane’s Vanes is a service that restores old weather vanes. Zane has just spent \$125 purchasing a 1920s-era weather vane which he expects to restore and sell for \$500 once the work is completed. After having spent \$125, Zane realizes that he will need to spend an additional \$200 on materials to complete the restoration. Alternatively, he can sell the weather vane without restoring it for \$200. What should he do?
2. B) It does not matter what he does; he is going to take a loss on the project. 3. C) He should finish the restoration and then sell the weather vane. 4. D) He should sell the weather vane back to the party he purchased it from and cut his losses. Answer: C Diff: 2 Page Ref: 7/7 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytical thinking Scenario 1-2 Suppose a cigar manufacturer currently sells 1,500 cigars per week and makes a profit of \$3,000 per week. The plant foreman observes, “Although the last 500 cigars we produced and sold increased our revenue by \$7,500 and our costs by \$7,000, we are only making an overall profit of \$3,000 per week so I think we need to cut back on production. 48) Refer to Scenario 1-2. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 500 cigars?
Diff: 1 Page Ref: 7/7 Topic: Optimal Decisions Are Made at the Margin *: Recurring
Learning Outcome: Micro-1: Identify the basic principles of economics and explain how to think like an economist. AACSB: Analytical thinking 49) Refer to Scenario 1-2 . Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 500 cigars?