a. keep the house and live in it.
b. go ahead with the $50,000 in repairs and sell the house for $390,000.
c. forgo the repairs and sell the house as it is for $350,000.
d. move the house from Cypress Street to a more desirable location, regardless of the cost of doing so.
ANSWER: c
48. You are considering staying in college another semester so that you can complete a major in finance. In deciding whether or not to stay you should
a. compare the total cost of your education to the total benefits of your education.
b. compare the total cost of your education to the benefits of staying one more semester.
c. compare the cost of staying one more semester to the benefits of staying one more semester.
d. compare the total benefits of your education to the cost of staying one more semester.
ANSWER: c
49. You go to the movieplex where movies ordinarily cost $8.00. You are intending to see a movie for which you have a $2.50-off coupon good for only that movie at that time. However, when you get there you see a friend who asks if you would rather see a new release. Both movies start and end at the same time. If you decide to see the new release with your friend, what is your opportunity cost?
a. The amount you value the first movie + $2.50
b. The amount you value the first movie + $8.00
c. $2.50
d. $8.00
ANSWER: a
50. Aiden and Zaria charge people to park on their lawn while attending a nearby craft fair. At the current price of $10, six people park on their lawn. If they raise the price to $15, they know that only five people will want to park on their lawn. Whether they have six or five cars parked on their lawn does not affect their costs. From this information it follows that
a. they should leave the price at $10.
b. it does not matter if they charge $10 or $15.
c. they would do better charging $15 than $10.
d. they should raise the price even more.
ANSWER: c
51. Your professor loves her work, teaching math. She has been offered other positions in the corporate world that would increase her income by 15 percent, but she has decided to continue working as a professor. Her decision would not change unless the marginal
a. cost of teaching increased.
b. benefit of teaching increased.
c. cost of a corporate job increased.
d. benefit of a corporate job decreased.
ANSWER: a
52. Suppose your finance professor has been offered a corporate job with a 25 percent pay increase. He has decided to take the job. For him, the marginal
a. cost of leaving was greater than the marginal benefit.
b. benefit of leaving was greater than the marginal cost.
c. benefit of teaching was greater than the marginal cost.
d. benefit of teaching was negative.
ANSWER: b
53. Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate?
a. People respond to incentives.
b. Rational people think at the margin.
c. Trade can make everyone better off.
d. Markets are usually a good way to organize economic activity.
ANSWER: a
54. Which of the following statements exemplifies a principle of individual decision making?
a. Trade can make everyone better off.
b. Governments can sometimes improve market outcomes.
c. The cost of something is what you give up to get it.
d. Prices rise when the government prints too much money.
ANSWER: c
55. Which of the following is not an example of a group responding to an incentive?
a. Students attend class because of an attendance policy that reduces their grade for absences.
b. Consumers buy more of a product when it is on sale at a reduced price.
c. Universities offer fewer online classes when they generate more revenue at the same cost than traditional classes.
d. Employees work harder to earn higher commissions.
ANSWER: c
56. Nevaeh decides to spend four hours playing video games rather than attending her classes. Her opportunity cost of playing video games is