Quiz 1

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Question 1
0 out of 10 points

Suppose Tara chooses to engage in an activity that she values at $80 on a night in which she faced two alternatives, all of which do not or would not have cost her any money. She values one alternative at $60 and another at $30. The opportunity cost to her of engaging in the activity is: Answer

Selected Answer:
$90
Correct Answer:
$60
Response Feedback:The opportunity cost of an activity includes the amount you value the next best alternative, not the sum of all alternatives. In this case, Tara values the next best alternative at $60.

Question 2
10 out of 10 points

Microeconomics focuses on the study of:
Answer
Selected Answer:
individual choices and of group behavior in individual markets. Correct Answer:
individual choices and of group behavior in individual markets. Response Feedback:Microeconomics is the study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.

Question 3
10 out of 10 points

The economic surplus to an individual from consuming a good is given by: Answer
Selected Answer:
the total benefits the individual receives from consuming the good minus the total costs the individual incurs from consuming the good. Correct Answer: the total benefits the individual receives from consuming the good minus the total costs the individual incurs from consuming the good. Response Feedback:The economic surplus from taking any action is the benefit of taking that action minus its cost.

Question 4
10 out of 10 points

Use the following cost table to answer the following question. Given the information on benefits and costs above, the optimal quantity equals: QuantityMarginal BenefitAverage CostMarginal Cost

12.991.001.00
22.992.003.00
32.993.005.00
42.994.007.00

Given the information on benefits and costs above, the optimal quantity equals: Answer
Selected Answer:
1
Correct Answer:
1
Response Feedback:The cost-benefit rule says one must consider marginal benefits and marginal costs when making optimal decisions. Therefore, the average cost column is irrelevant. The marginal benefits are at least as great as the marginal costs for only the first quantity.

Question 5
10 out of 10 points

Use the following cost table to answer the following question. Given the cost table above, the marginal cost associated with the third quantity equals: QuantityTotal Costs
0$0
1$100
2$220
3$360
4$580

Given the cost table above, the marginal cost associated with the third quantity equals: Answer
Selected Answer:
$120
Correct Answer:
$140
Response Feedback:The marginal costs of an activity are given by the additional costs incurred. Because total costs increase from $220 to $360 for the third quantity, the marginal costs associated with that quantity equal $140.

Question 6
10 out of 10 points

An individual could save $150 on item A, which represents 40% of the original cost, or $100 on B, which represents 50% of the original cost. Which of the following statements is true? Answer
Selected Answer:
The individual should consider the savings on item A to be largest because it is highest in absolute terms. Correct Answer:
The individual should consider the savings on item A to be largest because it is highest in absolute terms. Response Feedback:People should consider benefits in absolute dollar amounts, not as proportions.

Question 7
10 out of 10 points

An individual should take an action if, and only if:
Answer
Selected Answer:
the extra benefits from taking the action are at least as great as the extra cost. Correct Answer:
the extra benefits from taking the action are at least as great as the extra cost. Response Feedback:The Cost-Benefit Principle implies that an action should only be taken...
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