$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
Name:
Class:
Date:
Ch 01: MC Algo
Copyright Cengage Learning. Powered by Cognero. Page 11
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
Name:
Class:
Date:
Ch 01: MC Algo
Copyright Cengage Learning. Powered by Cognero. Page 12
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
a. the value of the knowledge she would have received had she attended her classes.
b. the $40 she could have earned if she had worked at her job for those four hours.
c. the value of her time playing video games minus the value of attending classes.
d. nothing, since she valued playing video games more than attending classes.
ANSWER: a
57. Which of the following industries has a marginal cost that is close to zero?
a. Automobile
b. Aircraft
c. Software
d. Furniture
ANSWER: c
58. Which is the most accurate statement about trade?
a. Trade can make every nation better off.
b. Trade makes some nations better off and others worse off.
c. Trading for a good can make a nation better off only if the nation cannot produce that good itself.
d. Trade helps rich nations and hurts poor nations.
ANSWER: a
59. Which of the following statements about trade is false?
a. Trade increases competition.
b. With trade, one country must win and one country must lose.
c. Bulgaria can benefit, potentially, from trade with any other country.
d. Trade allows people to buy a greater variety of goods and services at lower cost.