a
12. Nerida Kyle is thinking of buying a new car to avoid taking the bus to work. Each of the following is a cost she should consider when using the cost-benefit principle to evaluate this decision EXCEPT
a.
parking.
b.
car insurance.
c.
bus fare.
d.
repairs.
ANSWER:
c
13. Nerida Kyle is thinking of buying a car to avoid taking Lyft to work. She is using the cost-benefit principle to evaluate this decision and is calculating the costs and benefits to owning the car over the next year. She's gathered the following information to help her make her decision:
The car costs $15,000 to purchase, but she can resell it after a year of use for $13,500.
She thinks gas will cost her about $1,200 for the year.
The annual insurance premium for her car is $800.
Maintenance and repairs will cost about $300 for the year.
Using Lyft to get to work would cost her $4,000 for the year.
The cost of the car for the year is:
a.
$1,500.
b.
$4,000.
c.
$3,800.
d.
$7,800.
ANSWER:
c
14. The cost-benefit principle will lead you to make unselfish decisions if you
a.
account for unselfish motivations.
b.
maximize monetary costs and benefits.
c.
pursue only decisions for which the benefits outweigh the costs.
d.
maximize economic surplus.
ANSWER:
a
15. How is the economic surplus generated by a decision calculated?
a.
It is the total benefits minus total costs arising from the decision.
b.
It is the total benefits plus total costs arising from the decision.
c.
It is the sum of benefits arising from the decision.
d.
It is the sum of costs arising from the decision.
ANSWER:
a
16. _____ is a measure of how much your decision has _____ your well-being.
a.
Willingness to pay; improved
b.
Willingness to pay; reduced
c.
Economic surplus; increased
d.
Economic surplus; decreased
ANSWER:
c
17. Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does Kevin gain when he purchases the latte?
a.
$6
b.
$4
c.
$2
d.
$1
ANSWER:
b
18. Kevin Williamson goes to a local coffee shop and orders a medium-sized latte. His willingness to pay for that latte is $6. The price of the latte is $2. The cost to the coffee shop to produce the latte is $1. How much economic surplus does the coffee shop receive when Kevin purchases the latte?
a.
$6
b.
$4
c.
$2
d.
$1
ANSWER:
d
19. Amanda Mendez goes to a local café and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does Amanda receive when she purchases the sandwich?
a.
$10
b.
$6
c.
$4
d.
$3
ANSWER:
b
20. Amanda Mendez goes to a local cafe and orders a sandwich. Her willingness to pay for that sandwich is $10. The price of the sandwich is $4. The cost to the cafe to produce that sandwich is $1. How much economic surplus does the café receive when Amanda purchases the sandwich?
a.
$6
b.
$4
c.
$3
d.
$1
ANSWER:
c
21. Gary Parker is willing to pay $700 for a new iPad. Apple (the producer of iPads) is selling a new iPad for $600. It costs Apple $400 to produce this iPad. How much economic surplus does Gary receive if he purchases this iPad?