Question 1

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.Why has he decided to take the job

Accepted Answer

The professor has decided to take the job because the marginal benefit of leaving (30% pay increase) is greater than the marginal cost of leaving (possibly leaving a fulfilling job, leaving colleagues, etc.).

Question 2

Your professor loves her work teaching economics.She has been offered other positions in the corporate world making 25 percent more,but has decided to stay in teaching.What might change her decision

Accepted Answer

If the marginal cost of teaching increased, it would mean that the disadvantages or sacrifices associated with continuing to teach (such as time, effort, or financial opportunities given up) have become greater. This could make alternative options, like taking a corporate job, more appealing in comparison, potentially changing her decision to stay in teaching.

Question 3

Lisa buys a 1982 BMW,which she plans to restore and sell.She anticipates that the cost of the car and the repairs will be $11,000 and that she can sell it for $20,000.After she has spent $11,000,she discovers she needs to replace the engine,which will cost $5000.She can sell the car without the new engine for $14,000.What should Lisa do

Accepted Answer

By spending an additional $5000, Lisa can sell the car for $20,000, resulting in a total cost of $16,000 and a profit of $4,000. Selling it now for $14,000 would result in a loss of $3,000. Therefore, completing the repairs is the better financial decision.

Question 4

In the nation of Dictatorland,farmers traditionally feed grain to their livestock.Central planners,however,decided to increase the price of grain to make grain farmers happy and to reduce the price of bread made from that grain to make city dwellers happy.Now the price of bread is lower than the price of grain.What might we now expect

Accepted Answer

If the price of bread is lower than the price of grain, it becomes more cost-effective for farmers to feed their livestock bread instead of grain.

Question 5

Stan buys a 1966 Mustang,which he plans to restore and sell.He anticipates that the cost of the car and the repairs will be $15,000 and that he can sell it for $19,000.When he has spent $14,000,he discovers he needs to replace the engine,which will cost $5000.He can sell the car without the new engine for $16,000.What should Stan do

Accepted Answer

Considering the initial expected cost of $15,000, Stan planned to sell the car for $19,000, which would give him a profit of $4,000. However, he has already spent $14,000 and now he needs to replace the engine, which will cost him an additional $5,000. So, the total cost of the car will be $19,000 ($15,000 + $5,000), and he can sell it only for $16,000. Therefore, finishing the repairs and selling the car for $19,000 is not a profitable option in this scenario. Selling the car now for $16,000 will give him a profit of $2,000 ($16,000 - $14,000), which is better than incurring a loss from finishing the repairs and trying to sell it for $19,000. Hence, option B is the best choice in this scenario.

Question 6

When policymakers make policies that change the costs and benefits that people face,what is the result for society

Accepted Answer

When policymakers change the costs and benefits that people face, people's behaviours are altered as they weigh their options and make decisions based on the new incentives. This can lead to changes in society as a whole, as people's decision-making affects the economy, environment, and other aspects of society.

Question 7

Tim has spent $2500 purchasing and repairing a Hummer,which he expects to sell for $3500.He discovers that he needs an additional repair,which will cost $1100.He can sell the Hummer as it is now for $900.What should he do

Accepted Answer

If Tim completes the additional repair and sells the Hummer for $3500, he will earn a profit of $900 ($3500 - $2500 - $1100). If he sells the Hummer as it is now for $900, he will lose $1600 ($2500 - $900). Therefore, to maximize his profit, Tim should complete the additional repair and sell the Hummer for its projected value.

Question 8

Mike has spent $500 purchasing and repairing an old fishing boat,which he expects to sell for $800.He discovers that he needs an additional repair,which will cost $400.He can sell the boat as it is now for $300.What should he do

Accepted Answer

If Mike completes the additional repair and then sells the boat for $800, he will earn a profit of $400 ($800 selling price - $500 initial cost - $400 additional repair cost). On the other hand, if he sells the boat as it is now for $300, he will lose $200 ($300 selling price - $500 initial cost). Therefore, completing the repair and selling the boat is the best option to maximize his profit.

Question 9

Lisa buys a 1982 BMW,which she plans to restore and sell.She anticipates that the cost of the car and the repairs will be $10,000 and that she can sell it for $15,000.After she has spent $10,000,she discovers she needs to replace the engine,which will cost $4000.She can sell the car without the new engine for $11,000.What should Lisa do

Accepted Answer

The answer of Lisa buys a 1982 BMW,which she plans...

Question 10

Monica has spent $120,000 purchasing and repairing an old cabin,which she expects to sell for $130,000.She discovers that she needs an additional repair,which will cost $20,000.She can sell the cabin as it is now for $115,000.What should she do

Accepted Answer

If Monica sells the cabin now for $115,000, she will lose $5,000 ($120,000 - $115,000). If she spends an additional $20,000 on repairs, her total cost will be $140,000, and she will lose $10,000 ($140,000 - $130,000). Therefore, selling now minimizes her loss.

Question 11

Carol has spent $2000 purchasing and repairing an old car,which she expects to sell for $2400.She discovers that she needs an additional repair,which will cost $400.She can sell the car as it is now for $2000.What should she do

Accepted Answer

The answer of Carol has spent $2000 purchasing and repairing...

Question 12

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $1.00. Because this shop does not sell day-old donuts the next day, what should the manager do if he still has 10 dozen left at 2:30 p.m.?

Accepted Answer

The manager should lower the price of the remaining donuts even if the price falls below $1.00 to minimize losses, as any revenue is better than none for donuts that would otherwise be wasted.

Question 13

A furniture maker currently produces 100 tables per week and sells them for a profit.She is considering expanding her operation in order to make more tables.Should she expand

Accepted Answer

The decision to expand should be based on the comparison of the marginal cost with the marginal revenue. If the marginal revenue is higher than the marginal cost, the furniture maker should expand as she can earn additional profit by producing and selling more tables. However, if the marginal cost exceeds the marginal revenue, expanding would lead to a loss. Therefore, the furniture maker needs to consider the costs associated with expansion and analyze the market demand before making a decision.

Question 14

Mike has spent $800 purchasing and repairing an old motorcycle,which he expects to sell for $1,200.He discovers that he needs an additional repair,which will cost $200.He can sell the motorcycle as it is now for $400.What should he do

Accepted Answer

If Mike completes the additional repair for $200, his total cost will be $1,000 ($800 + $200), and he can sell it for $1,200. This means he will make a profit of $200. Whereas if he sells the motorcycle as it is now for $400, he will make a loss of $400 ($800 - $400). Therefore, completing the repair and selling the motorcycle is the best choice.

Question 15

The average cost per seat on an airplane trip from Calgary to Kelowna is $250.Suppose no refreshments are served and seven seats are empty.How could the airline company increase its profit

Accepted Answer

By charging any price above $0 for the remaining seats, the airline can increase its profit since the seats would otherwise generate no revenue if left empty.

Question 16

A donut shop sells fresh baked donuts from 5 a.m. until 3 p.m. every day but Sunday. The cost of making and selling a dozen glazed donuts is $2.00. Because this shop does not sell day-old donuts the next day, what should the manager do if she still has ten dozen left at 2:30 p.m.?

Accepted Answer

If the manager still has ten dozen left at 2:30 pm, it is unlikely that they will sell out by the time the shop closes at 3 pm. Lowering the price of the remaining donuts, even if it falls below the cost of making them, is a better option than throwing them away and losing even more money. This will attract customers who may not have been interested in buying donuts at the original price, and the shop will at least recover some of the cost of making the donuts.

Question 17

According to economists,what do people respond to

Accepted Answer

Economists generally believe that people respond to incentives. This can be in the form of financial rewards, punishments, or even social recognition. While laws and regulations can be seen as incentives, they are often effective because they carry punishments or rewards for compliance or non-compliance. Threats and negatives may also be effective in some cases, but economists tend to focus on the power of positive incentives in driving human behavior.

Question 18

When does a rational decision maker take an action

Accepted Answer

A rational decision maker will take an action only if the marginal benefit is greater than the marginal cost. This is because the marginal benefit represents the additional benefit gained from taking one more unit of the action, while the marginal cost represents the additional cost incurred by taking one more unit. By choosing to take the action only if the marginal benefit is greater than the marginal cost, the decision maker is ensuring that they are receiving a net benefit from the action.

Question 19

Stan buys a 1966 Mustang,which he plans to restore and sell.He anticipates that the cost of the car and the repairs will be $15,000 and that he can sell it for $19,000.When he has spent $15,000,he discovers he needs to replace the engine,which will cost $4000.He can sell the car without the new engine for $9000.What should Stan do

Accepted Answer

The answer of Stan buys a 1966 Mustang,which he plans...

Question 20

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.Why has he decided NOT to take the job

Accepted Answer

The question states that the management professor has decided NOT to take the corporate job with a 30 percent pay increase. This indicates that the marginal benefit of leaving was less than the marginal cost, as the professor has decided that the potential salary increase is not worth leaving their current job. Option A suggests that the marginal cost is greater than the marginal benefit, which is not in line with the professor's decision. Option B suggests that the opposite is true, which also contradicts the information provided in the question. Option D may be a factor in the professor's decision, but it does not explain why they ultimately decided not to take the job offer.

Quiz 1: Ten Principles of Economics