hour, the opportunity cost of one hour of rest or leisure is $10 per hour. If the wage rate increases from $10
to $20 per hour, the opportunity cost of one hour of rest or leisure also increases to $20 per hour. Therefore,
taking an hour of rest becomes more expensive for employees, and so the workers tend to work more than
they used to.
Difficulty: Medium
AACSB: Application of Knowledge
Topic: Opportunity Cost
22) ________ is a calculation that adds up the costs and benefits using a common unit of measurement, like
dollar values.
A) Cost‐benefit analysis
B) Revenue‐income analysis
C) Budget constraint analysis
D) Expenditure‐income analysis
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Cost‐Benefit Analysis
23) Cost‐benefit analysis requires ________.
A) choosing the alternative with the least net benefit
B) that all costs and benefits be measured in the same unit
C) evaluating the budget constraint before making a choice
D) that the risks associated with different alternatives be ignored
Answer: B
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Cost‐Benefit Analysis
24) Suppose that Jinelle, an engineer, has to choose between two jobs. Which of the following statements is
true?
A) When deciding between jobs, she should consider both the wage and the non‐wage attributes of each
job.
B) When deciding between jobs, she should focus only on the costs of each job and ignore the benefits.
C) When deciding between jobs, she should only focus on the benefits of each job and ignore the costs.
D) When deciding between jobs, she should consider the wage attributes and ignore the non‐wage
attributes of each job.
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Cost‐Benefit Analysis
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25) The net benefit of a particular alternative equals ________.
A) the benefits received from the alternative plus the costs incurred when choosing the alternative
B) the benefits received from the alternative divided by the costs incurred when choosing the alternative
C) the costs incurred when choosing the alternative divided by the benefits received from the alternative
D) the benefits received from the alternative minus the costs incurred when choosing the alternative
Answer: D
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Cost‐Benefit Analysis
26) Out of a set of feasible alternatives, an optimizer should choose the alternative with the ________.
A) highest net benefit
B) highest opportunity cost
C) lowest total cost, regardless of benefit
D) highest total benefit, regardless of cost
Answer: A
Difficulty: Easy
AACSB: Analytical Thinking
Topic: Cost‐Benefit Analysis
27) If a particular choice that an individual faces gives him a benefit of $20 but costs $30, the net benefit