Multiple Choice
1. The cost-benefit principle states that _____ are the incentives that shape decisions.
a.
costs and benefits
b.
incomes
c.
opportunity costs
d.
framing effects
ANSWER:
a
2. The cost-benefit principle states that a decision should be pursued only if the
a.
benefits are greater than the costs.
b.
costs are greater than the benefits.
c.
benefits are positive.
d.
costs are negative.
ANSWER:
a
3. The cost-benefit principle states that the full set of _____ should be evaluated when making any choice.
a.
opportunity costs
b.
economic surpluses
c.
costs and benefits
d.
interdependencies
ANSWER:
c
4. Economists convert costs and benefits into money equivalents by evaluating an individual's
a.
sunk costs.
b.
marginal benefits.
c.
opportunity costs.
d.
willingness to pay.
ANSWER:
d
5. Estimating willingness to pay quantifies _____ costs or benefits associated with a choice.
a.
financial
b.
nonfinancial
c.
opportunity
d.
marginal
ANSWER:
b
6. _____ is estimated by asking: "What is the _____ I am willing to pay to get this benefit (or avoid that cost)?"
a.
Willingness to pay; least
b.
Willingness to pay; most
c.
Opportunity cost; least
d.
Opportunity cost; most
ANSWER:
b
7. Economists use money equivalents to compare costs and benefits because money is
a.
critical to keeping an economy working smoothly.
b.
what is used to measure opportunity costs.
c.
a common measuring stick.
d.
what economic agents are trying to maximize.
ANSWER:
c
8. The key to using the cost-benefit principle is to think about _____ aspects of a decision.
a.
both financial and nonfinancial
b.
only financial
c.
only nonfinancial
d.
neither financial nor nonfinancial
ANSWER:
a
9. The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations evaluate _____ costs and benefits.
a.
both monetary and nonmonetary; only nonmonetary
b.
only monetary; both monetary and nonmonetary
c.
only nonmonetary; only monetary
d.
both monetary and nonmonetary; only monetary
ANSWER:
a
10. Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week.
a.
less; $150
b.
less; $75
c.
greater; $150
d.
greater; $75
ANSWER:
a
11. Nerida Kyle 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.
a.
less; $20
b.
less; $10
c.
greater; $20
d.
greater; $10
ANSWER:
1. The cost-benefit principle states that _____ are the incentives that shape decisions.
a.
costs and benefits
b.
incomes
c.
opportunity costs
d.
framing effects
ANSWER:
a
2. The cost-benefit principle states that a decision should be pursued only if the
a.
benefits are greater than the costs.
b.
costs are greater than the benefits.
c.
benefits are positive.
d.
costs are negative.
ANSWER:
a
3. The cost-benefit principle states that the full set of _____ should be evaluated when making any choice.
a.
opportunity costs
b.
economic surpluses
c.
costs and benefits
d.
interdependencies
ANSWER:
c
4. Economists convert costs and benefits into money equivalents by evaluating an individual's
a.
sunk costs.
b.
marginal benefits.
c.
opportunity costs.
d.
willingness to pay.
ANSWER:
d
5. Estimating willingness to pay quantifies _____ costs or benefits associated with a choice.
a.
financial
b.
nonfinancial
c.
opportunity
d.
marginal
ANSWER:
b
6. _____ is estimated by asking: "What is the _____ I am willing to pay to get this benefit (or avoid that cost)?"
a.
Willingness to pay; least
b.
Willingness to pay; most
c.
Opportunity cost; least
d.
Opportunity cost; most
ANSWER:
b
7. Economists use money equivalents to compare costs and benefits because money is
a.
critical to keeping an economy working smoothly.
b.
what is used to measure opportunity costs.
c.
a common measuring stick.
d.
what economic agents are trying to maximize.
ANSWER:
c
8. The key to using the cost-benefit principle is to think about _____ aspects of a decision.
a.
both financial and nonfinancial
b.
only financial
c.
only nonfinancial
d.
neither financial nor nonfinancial
ANSWER:
a
9. The cost-benefit principle evaluates _____ costs and benefits, and willingness-to-pay considerations evaluate _____ costs and benefits.
a.
both monetary and nonmonetary; only nonmonetary
b.
only monetary; both monetary and nonmonetary
c.
only nonmonetary; only monetary
d.
both monetary and nonmonetary; only monetary
ANSWER:
a
10. Nerida Kyle could either commute to work via Uber or purchase a new car. The average cost of her one-way Uber trip is $15. Nerida works five days a week for 50 weeks a year. Based solely on avoiding the cost of an Uber, Nerida should purchase a car if the cost of the car is _____ than _____ per week.
a.
less; $150
b.
less; $75
c.
greater; $150
d.
greater; $75
ANSWER:
a
11. Nerida Kyle 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.
a.
less; $20
b.
less; $10
c.
greater; $20
d.
greater; $10
ANSWER: