(Test Bank) Macroeconomics

Hubbard, 8

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1 Copyright © 20 21 Pearson Education , Inc. Macroeconomics, 8e (Hubbard/O'Brien) Chapter 1 Economics: Foundations and Models 1.1 Three Key Economic Ideas 1) In response to the Trump administration's trade policies and tax reductions offered by the state government, Taiwanese company Foxconn p lanned to build a factory in Wisconsin to manufacture LCD television screens. This is an example of Foxconn reacting to which of the three key economic ideas? A) Firms attempt to maximize revenues. B) Optimal decisions are made at the margin. C) Firms are allocatively efficient. D) People respond to economic incentives. Answer: D Diff: 2 Page Ref: 2/2 Topic: Scarcity Lear ning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical t hinkin g Special Feature: Chapter Opener: Does Apple Manufacture the iPhone in the United States? 2) The study of economics a rises due to A) money. B) scarcity. C) greed. D) resources. Answer: B Diff: 1 Page Ref: 4/4 Topic: Scarcity *: Recurring Learning Ou tcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytica l thinking 3) Scarcity refers to the situation in which A) unlimited wants exceed limited resources. B) unlimited resources exceed limi ted wants. C) a country's population is larger than its resource base. D) a nation's poverty level increases faster than its population. Answer: A Diff: 1 Page Ref: 4/4 Topic: Scarcity *: Recurring Learning Outcome: Micro -1: Identify the basic principl es of economic s and explain how to think like an economist AACSB: Analytical thinking 2 Copyright © 20 21 Pearson Education , Inc. 4) The basic economic problem of scarcity A) has always existed and will continue to exist. B) will eventually disappear as technology continues to a dvance. C) is a pr oblem only in d eveloping economies. D) does not apply to the wealthy in society. Answer: A Diff: 1 Page Ref: 4/4 Topic: Scarcity *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economi st AACSB: Anal ytical thinking 5) Economics is the study of the ________ people make to attain their goals, given their ________ resources. A) purchases; unlimited B) choices; scarce C) income; available D) decisions; household Answer: B Diff: 1 Page Ref: 4/4 Topic: Scarcity *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 6) What is an economic model? A) It is a des cription of an economic issue that inc ludes all possible related information. B) It is a description of an economic issue based on official government information. C) It is a detailed version of some aspect of economic life used to analyze an economic issu e. D) It is a simplified versi on of so me aspect of economic life used to analyze an economic issue. Answer: D Diff: 1 Page Ref: 4/4 Topic: Economic Models *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and expl ain how to think like an economist AACSB: A nalytical thinking 7) The term "market" in economics refers to A) a place where money changes hands. B) a legal institution where exchange can take place. C) a group of buyers and sellers of a product and the ar rangement by which they come togethe r to tra de. D) an organization which sells goods and services. Answer: C Diff: 1 Page Ref: 4/4 Topic: Markets *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analyti cal thinking 3 Copyright © 20 21 Pearson Education , Inc. 8) Economists assume that A) individuals behave in unpredictable ways. B) consumer behavior is explained by the existence of unlimited resources. C) people put other people's interests ahead of their own. D) optimal decisions are made at the margin. Answer: D Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 9) Which of the following best describes an assumption economists make about human behavior? A) They assume that individuals act rationally all the time in all circumstances. B) They assume that rational behavior is useful in explaining choices people make e ven th ough people may not behave rationally all the time. C) They assume that people take into account the question of fairness in all decisions they make. D) They assume that individuals act randomly. Answer: B Diff: 2 Page Ref: 5/5 Topic: People Are Ration al *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 10) Economists assume that rational people A) never use all available information as they act to achieve their goals. B) undertake activities that benefit others and hurt themselves. C) only weigh the benefits and costs of the most desirable alternative actions. D) respond to economic incentives. Answer: D Diff: 2 Page Ref: 5/5 Topic: People Are R ational *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 4 Copyright © 20 21 Pearson Education , Inc. 11) Your roommate, Serafina, a psychology major, said, "The problem with econom ics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment? A) Yes, I agree with her. One ca nnot make predictions about economic behavior bec ause in rea lity people make incorrect choices in many situations. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to exa mine the moral implications of these decisions. Answer: B Diff: 2 Page Ref: 5/5 Topic: People Are Rational *: Recurring Learning Outcome: Micro -1: Identify the basic principles of econom ics and explain how to think like an economist AACSB: Analytical thinking 12) Consider the following statements: a. Consumers rent more kayaks from a vendor that rents kayaks at a lower price than other rival kayak vendors along Waikiki beach. b. Depar tment stores take steps to increase security since they believe it is more costly to allow shoplifting than to install expensive security monitoring equipment. c. Farmers produce more cotton when its selling price falls. Which of the above statements dem onstrates that economic agents respond to incentives? A) a only. B) b only. C) c only. D) a and b. Answer: D Diff: 3 Page Ref: 5/5 Topic: People Respond to Economic Incentives *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analyti cal thinking 5 Copyright © 20 21 Pearson Education , Inc. 13) In the first six months of 2003, branches of Commerce Bank in New York City were robbed 14 times. The New York City Police recommended s teps the bank could take to d eter robberies, including the installation of plastic barriers called "b andit barriers." The police were surprised the bank did not take their advice. According to a deputy commissioner of police, "Commerce does very little of what we recommend. They've to ld our detectives they have no interest in ever putting in the barriers. " It would seem that Commerce Bank would have a strong incentive to install "bandit barriers" to deter robberies. Why wouldn't they do it? A) The banks would rather delay installati on of any theft deterring equipment in anticipation of new, lower -cost i nnovations in the security devices market. B) The banks must have weighed the cost of installing bandit barriers against the benefits and decided that they have "no interest in ever pu tting in the barriers." C) The banks are concerned that "bandit barriers " would send the wrong message to customers —that the bank is unsafe. D) The banks probably resent any interference from the police department. Answer: B Diff: 2 Page Ref: 5/5 Topic: People Respond to Economic Incentives *: Recurring Learning Outcome: M icro-1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 14) In response to the Trump adm inistration's tariffs o n Chinese imports, only one percent of the surveyed U.S. firms operating in so uthern China said they had any plans to establish manufacturing bases in North America. Assuming that managers at these companies used all available inform ation, including the ta riffs on Chinese imports, when making the decision of whether or not to move p roduction out of China and back to the United States exemplifies which key economic idea? A) People are rational. B) People respond to economic incentives. C) Optimal decisions a re made at the margin. D) The market system relies on the principle of volunta ry exchange. Answer: A Diff: 1 Page Ref: 5/5 Topic: People Are Rational Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think li ke an economist AACSB: Analytical thinking Special Feature: An Inside Look: Are Ta riffs Bringing Manufacturing Jobs Back Home or Just Raising Prices? 6 Copyright © 20 21 Pearson Education , Inc. 15) One reason some manufacturin g companies began moving production to China in the early 2000s was due to lower wages that could be paid to Chinese workers. Moving manufacturing to Chin a to take advantage of lower wages so goods could be produced at a lower cost than if produced in the United States exemplifies which key economic idea? A) People are ratio nal. B) People respond to economic incentives. C) Optimal decisions are made at the margin. D) The market system relies on the principle of voluntary exchange. Answer: B Diff: 1 Page Ref: 5/5 Topic: People Respond to Economic Incentives Learning Ou tcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking Special Feature: An Inside Look: Are Tariffs Bringing Manufa cturing Jobs Back Home or Just Raising Prices? 16) In 2018, two members of Congress introduced the Stop Bad Employers by Zeroing Out Subsidies Act, legis lation they hoped would increase wages of employees who were receiving government assistance. These me mbers of Congress thought this legislation would give firms a re ason to raise employee wages so fewer employees would receive the government assistance. U nder the act, firms whose employees received assistance from government programs such as Medicaid and SNAP would be required to A) pay a tax equal to the cost of the assistance. B) pay a minimum wage equal to twice the federal minimum wage. C) offer these employees comprehensive health insurance coverage for everyone in their immediate families. D) all of the above Answer: A Diff: 1 Page Ref: 5-6/5-6 Topic: Peo ple Respond to Economic Incentives Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking Special Feature: Apply the Concept: Would a Congressional Bill Aimed at Increa sing the Pay of Low -Wage Workers Backfire? 17) In 2018, two members of Congress introduced the Stop Bad Employers by Zeroing Out Subsidies Act, which would tax firms whose empl oyees receive government assistance. These members of Congress thought this leg islation would give firms a reason to raise employee wages so fewer employees would receive the government assistance. Jared Bernstein, who served as an economic advisor to form er Vice President Joe Biden, believed that the implementation of this legislati on A) would have little to no impact on the hiring or wages of low -wage workers. B) would signif icantly reduce the amount of government assistance provided to low -wage workers. C) would encourage employers to raise wages so as not to be subject to an addit ional tax. D) might give firms an incentive to avoid hiring workers who were likely eligible for government assistance. Answer: D Diff: 1 Page Ref: 5-6/5-6 Topic: People Respo nd to Economic Incentives Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking Special Feature: Apply the Concept: Would a Congressional Bill Aimed at Increasing the Pay of Low -Wage Workers Backfire? 7 Copyright © 20 21 Pearson Education , Inc. 18) What does the term "marginal" mean in economics? A) the edge of a market B) an additional or extra C) illegal D) secondary Answer: B Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurri ng Learning Outcome: Micro -1: Identify the basic principles of eco nomics and explain how to think like an economist AACSB: Analytical thinking 19) An office supply store se lls a ream of printer paper at a fixed price of $4.50. Which of the following is a term used by economists to describe the money received from the s ale of an additional ream of paper? A) marginal revenue B) gross earnings C) pure profit D) marginal costs Answer: A Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the bas ic principles of economics and explain how to think like an economist AACSB: Analytical thinking 20) Economics p romotes which of the following as the way t o make the best decision? A) Continue an enjoyable activity as long as you do not have to pay for i t. B) Continue an enjoyable activity until it is no longer enjoyable. C) Continue an enjoyable activity until you cannot afford to pursue it. D) Continue an enjoyable activity up to the point where its marginal benefit equals its marginal cost. Answer: D Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics a nd explain how to think like an economist AACSB: Analytical thinking 21) ________ involves undertaking an activity until its marginal benefits equal marginal costs. A) Scarcity reduction B) Central planning C) M arginal analysis D) Market intervention Answer: C Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recu rring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 8 Copyright © 20 21 Pearson Education , Inc. 22) The revenue received from the sale of an additional unit of a product A) is a marginal benefit to the firm. B) is called profit. C) is c alled gross sales. D) is called a net gain. Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and e xplain how to think like an economist AACSB: Analytical thinking 23) The cost incurred from the production of an additional unit o f a product A) is a marginal cost to the firm. B) is called a loss. C) is called opportunity cost. D) must be zero for a fir m to be efficient. Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical th inking 24) If the marginal cost for the U.S. Postal Service to deliver packages for Amazon on Sundays is estimated to be $250,000 per Sun day, then the U.S. Postal Service should make these Sunday deliveries A) only if the marginal benefit received each Su nday is less than $250,000. B) as long as the marginal benefit received each Sunday is just equal to or greater than $250,000. C) as long as the marginal cost each Sunday is lower than it had been before the Sun day deliveries. D) until the marginal benefit received falls to zero. Answer: B Diff: 2 Page Ref: 7/7 Topic: Optimal Decisions Are Made at the Margin Learning Outcome: Micro -1: Ide ntify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking Special Feature: Solved Problem: The Marginal Benefit and Marginal Cost of Delivering Packages for Amazon 25) If the marginal cost of producing a television is constant at $200, then a firm should produce this item A) only if the marginal benefit it recei ves is greater than $200 plus an acceptable profit margin. B) as long as the marginal benefit it receives is just equal to or greater than $200. C) as long as its marginal cost does not rise. D) until the marginal ben efit it receives reaches zero. Answer: B Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principle s of economics and explain how to think like an economist AACSB: Analyti cal thinking 9 Copyright © 20 21 Pearson Education , Inc. 26) Which of the f ollowing is an example of a "how much" decision? A) The Pleasantville movie theatre is open only in the evenings. The theatre's manager is debating whether to add daily matinee shows. B) The Zhous have demolished their old h ome and are debating whether to build a ranch -style house or a Craftsman home. C) You're planning to hold a graduation party and must decide between having your party catered or having a pot -luck. D) Chelsea has withdrawn from the swim team to take a ful l-time job. Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 27) Which of the following is a n example of a "how much" decision? A) Octavia is debating whether to buy a pair of Jimmy Choo shoes or Steve Madden boots. B) Humberto has tak en a second j ob to earn money to buy a Harley -Davidson SuperLow Sportster. C) You plan on going to Las Vegas for your birthday and are deciding if you should fly or drive. D) Diana is trying to decide if she should open her pet shop on Sundays. Answer: D Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Mic ro-1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 28) Marginal cost is the ___ _____ associa ted with a particular increase in an activity. A) total cost B) additional cost C) opportunity cost D) forgone cost Answer: B Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Ide ntify the bas ic principles of economics and explain how to think like an economist AACSB: Analytical thinking 10 Copyright © 20 21 Pearson Education , Inc. 29) Cassie's Quilts alters, reconstructs, and restores heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstructing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cas sie discovers th at she would need some special period fabric that would cost her $200 in material and time in order to complete the task. Alternatively, she can sell th e quilt "as is" now for $900. What is her marginal benefit if she sells the quilt "as is " now? A) $100 B) $900 C) She makes a marginal loss of $600, not a marginal benefit. D) The marginal benefit cannot be determined. Answer: B Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Mi cro-1: Identify the ba sic principles of economics and explain how to think like an economist AACSB: Analytical thinking 30) Cassie's Quilts alters, reconstructs, and restor es heirloom quilts. Cassie has just spent $800 purchasing, cleaning, and reconstru cting an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric tha t would cost her $200 in material and time in order to complete the task. Alternat ively, she can sell th e quilt "as is" now for $900. What is the marginal cost of completing the task? A) $200 B) $500 C) $1,000 D) $1,000 plus the value of her time Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 31) Cassie's Quilts alters , reconstructs, and restores heirloom quilts. Cassie has just spent $800 pur chasing, cleaning, and recon structing an antique quilt which she expects to sell for $1,500 once she is finished. After having spent $800, Cassie discovers that she would need some special period fabric that would cost her $200 in material and time in orde r to complete the task. Alte rnatively, she can sell the quilt "as is" now for $900. What should she do? A) She should cut her losses and sell the quilt now. B) It does not matter w hat she does; she is going to take a loss on her project. C) She should pur chase the period fabric, com plete the task and then sell the quilt. D) She should not do any more work on the quilt because she has already spent too much time on it and has not be en paid for that time. Answer: C Diff: 3 Page Ref: 6/6 Topic: Optima l Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thin king 11 Copyright © 20 21 Pearson Education , Inc. 32) Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a servi ce that adds an additional $10 to the total cost of the standard packa ge. What is Lionel's marginal benefit if he sells the standard package? A) $10 B) $15 C) $25 D) $40 Answer: C Diff: 3 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic princip les of economics and explain how to think like an economist AACSB: Analytical think ing 33) Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. For a total price of $40, Lionel will also trim shrubs, a service that adds an additional $10 to the total cost of the standard package. What is Lionel's marginal cost of ad ding the shrub -trimming service to the standard package? A) $10 B) $15 C) $25 D) $40 Answer: A Diff: 3 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 34) Lionel's Lawn Care is a company that maintains residential yards. Lionel's cost for his standard package of mowing, edging, and trimming is $15, and he charges $25 for this service. Fo r a total price of $40, Lionel will also trim shrubs, a se rvice that add s an additional $10 to the total cost of the standard package. Should Lionel continue to offer the shrub -trimming service? A) Yes, his marginal benefit is greater than his marginal cos t. B) Yes, but only if he raises the price of the standard package. C) N o, his marginal benefit is less than his marginal cost. D) More information is needed for Lionel to make this decision. Answer: A Diff: 3 Page Ref: 6/6 Topic: Optimal Decisions Are M ade at the Margin *: Recurring Learning Outcome: M icro-1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 12 Copyright © 20 21 Pearson Education , Inc. Scenario 1 -1 Suppose a t -shirt manufacturer currently sells 5,000 t -shirts per week and makes a profit of $10,000 per week. A manag er at the plant obser ves, "Although the last 400 t -shirts we produced and sold increased our revenue by $4,000 and our costs by $4,800, we are still making an overall profit of $10,000 per week so I think we're on the right track. We are producing the opti mal number of t -shirt s." 35) Refer to Scenario 1 -1. Using marginal analysis terminology, what is another economic term for the incremental revenue received from the sale of the last 400 t -shirts? A) gro ss earnings B) marginal revenue C) sales revenue D) gross profit Answer: B Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 36) Refer to Scenario 1 -1. Using marginal analysis terminology, what is another economic term for the incremental cost of producing the last 400 t -shirts? A) marginal cost B) operating cost C) explicit cost D) Any of the above terms are correct. Answer: A Diff: 1 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 37) Refer to Scena rio 1 -1. Had the firm not produced and sold the last 400 t -shirts, would its profit be higher or lower, and if so by how much? A) Its profit would be $4,800 higher. B) Its profit would be $800 higher. C) Its profit would be $800 lower. D) It s profit would be $4,000 lower. Answer: B Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analy tical th inking 13 Copyright © 20 21 Pearson Education , Inc. Table 1 -1 Hours Open Total Revenue (dollars) 1 $35 2 60 3 80 4 92 5 100 6 105 Eva runs a small bakery in the village of Roggerli. She is debating whether she should extend her hours of operation. E va figures that her sales revenue will depend on the number of additional hours the bakery is open as shown in the table above. She would have to hire a worker for those hours at a wage rate of $12 per hour. 38) Refer to Table 1 -1. Using marginal analysi s, how many hours should Eva exten d her bakery's hours of operations? A) 2 hours B) 3 hours C) 4 hours D) 5 hours Answer: C Diff: 3 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 39) Refer to Table 1 -1. What is Eva's marginal benefit if she decides to stay open for two hours instead of one hour? A) $25 B) $36 C) $60 D) $95 Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 14 Copyright © 20 21 Pearson Education , Inc. 40) Refer to Table 1 -1. What is Eva's marginal cos t if she decides to stay open for two hours instead of one hour? A) $12 B) $24 C) $36 D) $71 Answe r: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the bas ic principles of economics and explain how to think like an economist AACSB: Analytical thinking Table 1 -2 Hours Open Total Revenue (dollars) 1 $40 2 65 3 80 4 90 5 95 6 98 Julius runs a small tailor shop in the city of Bloomfield. H e is debating wh ether he should extend his hours of operation. Julius figures that his sales revenue will depend on the number of additional hours the tailor shop is open as shown in the table abo ve. He would have to hire a worker for those hours at a wage rate of $18 per hour. 41) Refer to Table 1 -2. Using marginal analysis, how many hours should Julius extend his shop's hours of operations? A) 2 hours B) 3 hours C) 4 hours D) 5 hours Answer: A Diff: 3 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margi n *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 15 Copyright © 20 21 Pearson Education , Inc. 42) Refer to Table 1 -2. Wha t is Julius's marginal benefit if he decides to stay open f or three h ours instead of two hours? A) $15 B) $25 C) $65 D) $80 Answer: A Diff: 2 Page Ref: 6/6 Topic: Optimal Decisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to thin k like an economist AACSB: Analytical thinking 43) Refer to Table 1 -2. What is Julius's marginal cost if he decides to stay open for three hours instead of two hours? A) $0 B) $18 C) $54 D) $65 Answer: B Diff: 2 Page Ref: 6/6 Topic: Optimal Decision s Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking 44) Tabit ha shares a flea market booth with her sister. Her share of the r ent is $150 per month. She is considering moving to her own, larger booth which she will not have to share with anyone. The larger booth rents for $450 per month. Recently, you ran into Tabit ha in the grocery store and she tells you that she has rented the larger booth. Tabitha is as rational as any other person. As an economics major, you rightly conclude that A) Tabitha did not have a choice; her sister was overcharging her. B) Tabitha figur es that the additional benefit of having her own booth (as oppose d to sharing) is at least $300. C) Tabitha figures that the additional benefit of having her own booth (as opposed to sharing) is at least $450. D) the cost of having one's own booth outweigh s the benefits. Answer: B Diff: 2 Page Ref: 6/6 Topic: Op timal De cisions Are Made at the Margin *: Recurring Learning Outcome: Micro -1: Identify the basic principles of economics and explain how to think like an economist AACSB: Analytical thinking