Question 1

When you golf you receive 18 units of pleasure from the first hole and on each hole thereafter your pleasure drops by one unit so that the 17^th hole gives you 17 units of pleasure etc.

Accepted Answer

The answer of When you golf you receive 18 units...

Question 2

Which of the following statements could be considered a normative statement?

Accepted Answer

Statement A expresses a value judgment and recommends a course of action, making it a normative statement. B and C are descriptive statements that state facts, while D is a quantitative statement that provides information without expressing a value judgment.

Question 3

You can drive to campus, take a bus, or walk. Driving costs you $1/mile in gas and maintenance, the bus costs $1 for unlimited distance, and walking is free but involves a disutility equivalent to $1/mile. If you live 2 miles from campus, and are a rational decision maker, what is your reservation price for a bus ticket?

Accepted Answer

The reservation price for a bus ticket is the maximum amount you are willing to pay for it. Driving costs $2 (2 miles x $1/mile), and walking has a disutility of $2 (2 miles x $1/mile). Therefore, the reservation price for the bus ticket, which provides the same utility as driving or walking, is $2.

Question 4

You are in the line to go see a movie when you suddenly realized you have lost your ticket. It would cost you $10 to buy a new ticket. Now you are deciding whether to buy a new ticket or not. Assuming you have enough money to buy a new ticket, you would always buy the new ticket as long as:

Accepted Answer

The reservation price is the maximum amount you are willing to pay for a good or service. In this case, if your reservation price for the movie ticket is equal to or greater than $10, it means that you value the movie ticket as much as or more than $10. Therefore, it makes sense to buy a new ticket for $10 since you would still receive as much value as you are paying for it. Options B, C, and D are not applicable since they do not follow this logic.

Question 5

Academic institutions frequently talk about academic excellence and how they have superior programs in everything. "If it is not top quality it will not be offered here" seems to be the theme of many college catalogs. Explain, on the basis of material in this chapter, why this public relations noise is not believable.

Accepted Answer

The answer of Academic institutions frequently talk about academic excellence...

Question 6

The marginal benefit of a typical activity

Accepted Answer

The law of diminishing marginal benefit states that as you consume more of a good or activity, the additional benefit received from each additional unit consumed will eventually decrease. Therefore, the marginal benefit of a typical activity will decrease as you do more of it.

Question 7

Suppose the first hour of study today will allow you to answer 10 correct questions in tomorrow's exam. After the first hour, the marginal benefit of each additional hour of study is reduced by 2 (meaning if you study 2 hours today your total number of correct responses tomorrow will be 18 and if you study 3 hours it will be 24 and so on). If the costs of studying each additional hour are zero, how many hours you should study?

Accepted Answer

To maximize the benefit, we should study until the marginal benefit equals the marginal cost, which in this case is zero. We can find the optimal study hours by calculating the marginal benefit of each additional hour until it becomes zero:

- First hour: 10 correct answers
- Second hour: 18 - 10 = 8 correct answers
- Third hour: 24 - 18 = 6 correct answers
- Fourth hour: 28 - 24 = 4 correct answers
- Fifth hour: 30 - 28 = 2 correct answers
- Sixth hour: 30 - 30 = 0 correct answers

So, the optimal study time is 6 hours, which will result in 30 correct answers on the exam. Any additional hours of study would not provide any additional benefit, since the marginal benefit is zero. Therefore, the answer is (C) 6.

Question 8

Adam Smith wrote two very important books. The Wealth of Nations describes how markets work when people exercise self-interest. The other claims that humans

Accepted Answer

Smith's other book, The Theory of Moral Sentiments, argues that humans have a natural moral sense that makes them concerned with the wellbeing of others, in addition to their own self-interest. This concept is often referred to as "sympathy" or "empathy."

Question 9

When one is considering costs of taking a trip in their car, the average cost per mile includes some items of cost that are not included in the marginal cost of a mile driven. This statement is

Accepted Answer

The average cost per mile includes both fixed costs (such as insurance and depreciation) and variable costs (such as fuel and maintenance), whereas the marginal cost of a mile driven typically includes only the additional costs directly associated with driving that extra mile, like fuel and incremental wear and tear, not fixed costs.

Question 10

You recently took the car to the mechanic to fix its engine. The mechanic had quoted you a total price for the work of $1000, and you had decided to go ahead with the work. Nevertheless, when you go to pick up the car he tells you that in order to complete the job he needs to buy another part adding about $200 extra to the cost of fixing the car. According to the cost-benefit rule you should pay the extra money to finish the job only if the benefits of using the car are greater or equal to

Accepted Answer

The answer of You recently took the car to the...

Question 11

Joe is one mile from the finish of a grueling 26 mile marathon. Tim is at the four mile mark of a five mile run. Which runner is most likely to be emotionally energized for the race to the finish line?

Accepted Answer

Joe is in the final mile of a grueling 26 mile marathon, which means he has pushed through physical and mental challenges for over 25 miles. This final mile will be the culmination of his perseverance and hard work, making him more likely to be emotionally energized for the race to the finish line. In contrast, Tim is only in the middle of a 5 mile run, and while he may be energized, it is less likely that he has the same emotional investment in reaching the finish line as Joe does.

Question 12

If you receive $18 worth of pleasure from the first hole of golf played and your additional pleasure from succeeding holes drops $1 for each hole played, if the cost per hole is zero, how many holes of golf will you play?

Accepted Answer

You will play until the marginal pleasure equals zero. Starting at $18 for the first hole and decreasing by $1 for each subsequent hole, you will stop playing after the 18th hole, when the pleasure drops to $0.

Question 13

You have just won a ticket to see John Mayer in concert this Saturday evening. Nevertheless, it would cost you around $20 in transportation costs to go to the concert since you would have to drive to the neighboring city (where the concert is taking place). Tickets for the concert are selling for $100 in your town. Assuming you only work Monday-Fridays, the cost of going to the concert is:

Accepted Answer

The cost of going to the concert would be $120 ($100 for the ticket and $20 for transportation), which is more expensive than the ticket price in your town. Therefore, it is not worth it to go to the concert and the best choice would be to not use the ticket and stay home.

Question 14

According to the text, standard economic models, based on self-interest where calculations appear to be made for every decision,

Accepted Answer

The answer of According to the text, standard economic models,...

Question 15

If the benefits of X = $100 and the price of X = $50, then

Accepted Answer

The reservation price is the maximum price that a person is willing to pay for a good or service. In this case, the benefits of X are $100, meaning that the maximum amount someone should be willing to pay for X is $100. Since the price of X is $50, which is lower than the reservation price of $100, it would be a good choice to buy X. Therefore, the answer is A.

Question 16

Suppose you buy two tickets to the concert; one for you and one for your girlfriend. Nevertheless, the day of the concert your car brakes down preventing both of you from attending it. Assuming both you and your girlfriend had the same preferences, which of the two of you stand to lose the most from not being able to attend the concert?

Accepted Answer

Since both you and your girlfriend had the same preferences, both of you would stand to lose the same amount from not being able to attend the concert. It's a shared experience that both of you were looking forward to, so neither one of you would lose more or less than the other. Therefore, the correct choice is C.

Question 17

If you receive $18 worth of pleasure from the first hole of golf played and your additional pleasure from succeeding holes drops $1 for each hole played, how many holes of golf would you play if you had to pay $2.10 per hole?

Accepted Answer

The answer of If you receive $18 worth of pleasure...

Question 18

Unbridled self-interest fails to coordinate resource flows most effectively in which of the following cases?

Accepted Answer

The building of a tornado warning siren is not driven by individual demand or profit motives, but rather by the need for public safety and coordination. Unbridled self-interest may not necessarily result in the most effective allocation of resources in this case.

Question 19

If you receive $18 worth of pleasure from the first hole of golf played and your additional pleasure from succeeding holes drops $1 for each hole played. You must pay $25 up front to get on the course but you can then play as many holes as you like for the day without any further charge. How many holes of golf will you play?

Accepted Answer