Question 1

Marginal analysis should not be used for "how-much" decisions.

1. True
2. False

Question 2

Suppose Bob has a part-time business washing cars. He has washed nine cars on a given day; the marginal benefit of washing the tenth car is $20 and the marginal cost is $12. Bob should:

1. not wash the tenth car.
2. increase his marginal benefit.
3. There is not enough information to decide.
4. wash the tenth car.

Question 3

In making an "either-or" decision

1. choose the activity that results in the greater accounting profit.
2. choose the activity that results in the greater economic profit.
3. continue in an activity as long as the marginal cost is greater than the marginal benefit.
4. continue in an activity as long as the marginal cost is less than the marginal benefit.

Question 4

According to the optimal output rule, if the marginal benefit is:

1. less than the marginal cost, an activity should be increased.
2. more than the marginal cost, net benefit is maximized.
3. more than the marginal cost, an activity should be increased.
4. equal to the marginal cost, an activity should be increased.

Question 4

According to the optimal output rule, if the marginal benefit is:

1. less than the marginal cost, an activity should be increased.
2. more than the marginal cost, net benefit is maximized.
3. more than the marginal cost, an activity should be increased.
4. equal to the marginal cost, an activity should be increased.

Question 6

An increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread, will result in which of the following changes in the bread market?

1. Both the equilibrium price and quantity will increase.
2. Both the equilibrium price and quantity will decrease.
3. Equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.
4. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

Question 7

Equilibrium occurs where the demand curve intersects the supply curve.

1. True
2. False

Question 8

The market for lemonade is in equilibrium and the price of lemons rises. How will this affect the lemonade market?

1. Supply will decrease, increasing the price and decreasing the quantity.
2. Demand will decrease, increasing the price and decreasing the quantity.
3. Demand will decrease, decreasing the price and decreasing the quantity.
4. Supply will increase, decreasing the price and increasing the quantity.

Question 9

If goods A and Z are complements, an increase in the price of good Z will:

1. decrease the demand for good A.
2. decrease the demand for both good A and good Z.
3. increase the demand for good A.
4. decrease the demand for good Z.

Question 10

The demand for a good will increase if:

1. the price of inputs needed in the production of the good decrease.
2. the price of a complementary good increases.
3. there is a decrease in the price of the good.
4. there is an increase in the number of consumers in this market.

Question 11

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:

1. the price listed on the ticket or whatever Khalil would have done had he not gone to the opera.
2. whatever Khalil would have done had he not gone to the opera.
3. zerothe tickets were free.
4. the price listed on the ticket.

Question 12

The "non-satiation" assumption about human behavior says that ____.

1. People cannot be made happier
2. People are always happy and satisfied
3. People always try to make other happier
4. People are never fully satisfied

Question 13

The opportunity cost of a choice should beadded tothe direct cost of the choice in order to calculate the total cost of the choice.

1. True
2. False