Deck 2: The Economic Way of Thinking

Question 1

The opportunity cost of attending college is likely higher for a high school graduate who leaves a job grilling hamburgers than it is for a high school dropout who leaves a job working as a computer network administrator.

Answer 1

False

Question 2

Since it is possible to grow coffee in the United States, we should clearly create a U.S.coffee industry and no longer import coffee from Brazil.

Answer 2

False

Question 3

The opportunity cost of a decision is the value of all of the available alternatives that were not chosen.

Answer 3

False

Question 4

When considering whether or not to consume a second slice of cake, an individual is following marginal thinking if she compares the total cost of consuming both the first and second slices with their total benefit before making a decision.

Question 5

The opportunity cost of an item is:

A)greater during periods of inflation and lower during periods of deflation.
B)the highest valued alternative you give up to get that item.
C)the value of all available alternatives you sacrifice to get that item.
D)always equal to the dollar value of the item.
E)always less than the dollar value of the item.

Question 6

Small, developing countries must first become self-sufficient before they can benefit from international trade.

Question 7

If Xavier gives up a job in which he earns $23,000 per year in order to go to college full time, his foregone income is part of the opportunity cost of going to college.

Question 8

A student has a chance to see Green Day in concert.The student also has a major economics exam in the morning.If the student goes to the concert:

A)she may receive a lower grade on the economics exam.
B)the opportunity cost of the concert is the value of the time spent studying.
C)the decision involves a trade-off.
D)all of the above are correct.

Question 9

A country has a comparative advantage in the production of DVD players if it can produce DVD players at a lower opportunity cost than others.

Question 10

A university offers a free shuttle service around campus.The opportunity cost of the shuttle service is equal to:

A)zero, since it is free to students who want to ride.
B)the wages paid to the shuttle drivers.
C)the wages paid to the shuttle drivers, plus the gasoline expenses.
D)the highest valued alternative use of the resources devoted to the shuttle program.

Question 11

Trent decides to spend an hour playing basketball rather than studying.His opportunity cost is:

A)nothing because he enjoys playing basketball more than studying.
B)the benefit to his grades from studying for an hour.
C)the increase in skill he obtains from playing basketball for that hour.
D)nothing because he had a free pass into the sports complex to play basketball.

Question 12

Whom of the following would economists consider most likely to commit a crime?

A)An individual with a high paying job because he faces a lower opportunity cost if caught
B)An individual with a high paying job because he faces a higher opportunity cost if caught
C)An individual without a job because he faces a lower opportunity cost if caught
D)An individual without a job because he faces a higher opportunity cost if caught

Question 13

The opportunity cost of a decision is the value of the best foregone alternative.

Question 14

Which of the following statements is true?

A)The opportunity cost of a decision is equal to the explicit cost in monetary terms.
B)The opportunity cost of a decision is the value of the best foregone alternative.
C)Some economic decisions have zero opportunity cost.
D)The opportunity cost of attending college is the same for all students at the same university but may differ among students at different universities.
E)None of the above statements are true.

Question 15

In order to acquire more of a good we must sacrifice production of another good (because resources are in limited supply).This illustrates the concept of:

A)exchange.
B)ceteris paribus.
C)opportunity cost.
D)specialization.
E)the division of labor.

Question 16

The opportunity cost of an action is equal to:

A)the monetary expense incurred as a result of the action.
B)the value of any alternative use of the time expended on the action.
C)the highest valued alternative sacrificed as a result of the action.
D)the sum of the benefits received as a result of the action.
E)the time value of money.

Question 17

Marginal cost is the additional cost incurred as a result of an economic decision.

Question 18

The opportunity cost of an action is equal to:

A)the monetary payment the action required.
B)the total time spent by all parties in carrying out the action.
C)the highest valued opportunity that must be sacrificed in order to take the action.
D)the value of all of the alternative actions that could have been taken.
E)zero, as only goods cost money.

Question 19

Implementing a stricter smog control program after determining that the benefits of increased air quality outweigh the costs of pollution reduction is consistent with the rule of rational choice.

Question 20

Airlines that restrict the use of frequent flyer miles during holiday periods likely do so because:

A)the opportunity cost to airlines of filling seats with frequent flyers is lower at these times.
B)the opportunity cost to airlines of filling seats with frequent flyers is higher at these times.
C)passengers have more transportation alternatives available to them at these times.
D)airlines want to protect their most loyal customers from the discomfort of overcrowded airplanes.

Question 21

Beers at the football stadium cost $4 each.Cynthia will stop drinking beer when:

A)the marginal benefit received from consuming peanuts with beer just equals $4.
B)the marginal cost of an additional beer is less than $4.
C)the marginal benefit of an additional beer equals zero.
D)the marginal benefit of an additional beer falls below $4.

Question 22

The opportunity cost of an action is:

A)the value of the best foregone alternative.
B)the difference between the benefits that result and the expenses incurred as a result of the action.
C)the same as the expected benefit of the action.
D)the same for everyone who undertakes the action.

Question 23

Marginal analysis involves:

A)comparing the total benefits of all actions to the total costs incurred as a result of those actions.
B)abstract thinking, which is never actually utilized by consumers when making purchasing decisions.
C)holding all other variables constant when isolating the relationship between two variables.
D)comparing the additional benefit from an action to the additional cost.

Question 24

The highest valued alternative sacrificed as a result of a choice is:

A)the opportunity cost, which can be objectively measured by anyone.
B)the opportunity cost, which can only be subjectively measured by the individual who chooses.
C)the explicit cost, which can be objectively measured by anyone.
D)the explicit cost, which can only be subjectively measured by the individual who chooses.
E)the accounting cost, which can only be objectively measured by an accountant.

Question 25

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

A)$4.
B)$40.
C)$44.
D)$0.
E)dependent on the usefulness of the information learned in class.

Question 26

An airline having 5 unoccupied seats on a flight from California to Chicago decides to sell these tickets at $300, which is less than its average cost per ticket of $450.Which of the following might have prompted this decision to sell tickets below cost?

A)total costs
B)average costs
C)marginal costs
D)traceable costs

Question 27

The rule of rational choice suggests that you will engage in more of an activity if:

A)the total benefit from that activity exceeds the total cost of the activity.
B)the opportunity cost of your time is very low.
C)the additional cost incurred as a result of the activity exceeds the additional benefit received.
D)the additional benefit received as a result of the activity exceeds the additional cost incurred.
E)the additional cost incurred as a result of the activity is equal to the average cost of the activity.

Question 28

Marginal thinking is best demonstrated by:

A)choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.
B)deciding to never purchase a coat made with animal skins or furs.
C)acquiring the information relevant to a choice before making that choice.
D)measuring all of the costs of a meal against all of the benefits when deciding whether to order a second milkshake.
E)choosing to purchase beer until there is no additional enjoyment from the consumption of beer.

Question 29

Lance's boss offers him twice his usual wage rate to work tonight instead of taking his girlfriend on a romantic date.This offer will likely:

A)not affect the opportunity cost of going on the date.
B)reduce the opportunity cost of going on the date because giving up the additional work dollars will make his girlfriend feel even more appreciated.
C)increase the opportunity cost of going on the date.
D)reduce the opportunity cost of working.

Question 30

Jamie and Danny both attend the same college and incur the same expenses for tuition, books, and school supplies.Jamie gave up a lucrative modeling job in Paris to attend school full-time and Danny gave up a part-time job as a sales clerk in a department store.It follows that:

A)the opportunity cost of attending college is the same for both since they are enrolled at the same academic institution.
B)the opportunity cost of attending college is likely greater for Jamie than for Danny.
C)the opportunity cost of attending college is likely greater for Danny than for Jamie.
D)the opportunity cost is minimal for both since college graduates are paid much higher than high school graduates on average.

Question 31

"Opportunity cost" refers to:

A)the dollar price paid for a good.
B)the price paid for the opportunity to buy stock in an initial public offering.
C)the value of the best foregone alternative.
D)the finder's fee paid to a job placement agency for locating employment for workers.
E)the membership fee paid to join a club.

Question 32

The opportunity cost of going to college includes:

A)both tuition and the value of the student's time.
B)tuition, but not the value of the student's time, which is a cash cost.
C)tuition, but not the value of the student's time, which is a monetary cost.
D)neither tuition nor the value of the student's time, since obtaining a college degree makes one's income higher in the future.
E)neither tuition nor the value of the student's time, at least at state-supported universities and colleges.

Question 33

Opportunity cost includes

A)monetary costs only.
B)non-monetary costs only.
C)both monetary and non-monetary costs.
D)neither monetary nor non-monetary costs.

Question 34

The opportunity cost of attending college is likely to include all except which of the following?

A)the cost of required textbooks
B)tuition fees
C)the income you forego in order to attend classes
D)the cost of haircuts received during the school term
E)the cost of paper and pencils needed to take notes

Question 35

The opportunity cost of attending a college basketball game is:

A)price of the admission to the game.
B)the sum of the value of all the alternative uses of your time while at the game.
C)the value of the highest alternative use of your time and money sacrificed as a result of attending the game.
D)less if your favorite team wins.

Question 36

The expression, "There's no such thing as a free lunch" implies that:

A)everyone has to pay for his/her own lunch.
B)the person consuming a good must always pay for it.
C)costs are incurred when resources are used to produce goods and services.
D)no one has time for a good lunch anymore.

Question 37

Which of the following would be likely to raise your opportunity cost of attending a big basketball game this Sunday night?

A)A friend calls you up and offers you free tickets to a concert by one of your favorite bands on Sunday night.
B)Your employer offered you double your usual wage to work this Sunday night.
C)Late Friday afternoon, your physics professor makes a surprise announcement that there will be a major exam on Monday morning.
D)All of the above would likely raise the opportunity cost of attending the game.

Question 38

The opportunity cost of attending a university for a year is measured by:

A)the tuition fees incurred.
B)the size of the student loans the student becomes responsible for.
C)the sum of all expenditures on rent, food, books, and tuition incurred during the school year.
D)the value of the best opportunity or opportunities foregone in order to enroll for the year.

Question 39

If a student enrolls in an additional course at the university, an economist would conclude that:

A)the total benefit that the student expects to receive as a result of completing her college degree exceeds the total cost of her college education.
B)the student is not following the rule of rational choice.
C)the student must not be involved in extracurricular campus activities.
D)the expected marginal benefit of an additional course must exceed the expected marginal cost of the course.

Question 40

The opportunity cost of an airplane flight:

A)differs across passengers only to the extent that each traveler pays a different airfare.
B)is identical for all passengers and equal to the number of hours a particular flight takes.
C)differs across passengers to the extent that both the airfare paid and the highest valued use of travel time vary.
D)is equal to the cost of a bus ticket, the next best form of alternative transportation to flying.

Question 41

The rule of rational choice:

A)requires the availability of complete information before decisions can be made.
B)can only be applied in business decisions.
C)involves "marginal thinking."
D)is clearly not the basis on which criminals make decisions.
E)is the basis on which only greedy people make decisions.

Question 42

The following table shows the marginal benefit to a consumer from viewing theatrical-release films each month. $$\begin{array} { c c } \text { Movie tickets per month } & \text { Marginal Benefit (in dollars) } \\1 & \$ 10.50 \\2 & \$ 9.50 \\3 & \$ 8.50 \\4 & \$ 7.50 \\5 & \$ 6.50 \\6 & \$ 5.50 \\7 & \$ 4.50 \\8 & \$ 3.50\end{array}$$ If the price of a movie ticket is $8, a consumer following the rule of rational choice will purchase:

A)2 movie tickets per month.
B)3 movie tickets per month.
C)4 movie tickets per month.
D)5 movie tickets per month.
E)6 movie tickets per month.

Question 43

The marginal benefit to Lasca of weekend vacations during the year at a local resort are given by the following schedule: $$\begin{array} { c c } \text { Number of Weekend Vacations } & \text { Marginal Benefít } \\1 & \$ 600 \\2 & \$ 550 \\3 & \$ 475 \\4 & \$ 325 \\5 & \$ 250 \\6 & \$ 180\end{array}$$ If the marginal cost of a weekend vacation at the local resort is constant and equal to $350, how many weekends at the local resort is Lasca likely to enjoy?

A)2
B)3
C)4
D)5
E)6

Question 44

The marginal benefit to you of drinking bottled iced tea is $1.50.The price of a bottle of iced tea is $1.25.

A)If you purchase iced tea you will suffer a net loss of 25 cents per bottle.
B)If you purchase a bottle of iced tea, the net gain to you from doing so is 25 cents.
C)You will not purchase iced tea if you are acting rationally.
D)If you are acting rationally, you will purchase iced tea until the marginal benefit falls to 25 cents.

Question 45

If a local pizzeria charges $2.50 per slice or $8.00 for a small pizza equal in size to four slices, what would be the marginal cost of a 4^th slice of pizza?

A)$0.50
B)$2.00
C)$2.50
D)$8.00

Question 46

The expected marginal benefit to you from purchasing a new sport utility vehicle is $20,000.The price of the new sport utility vehicle is $22,000.

A)If you are acting rationally, you will borrow $2,000 and purchase a new sport utility vehicle.
B)You will not purchase the new sport utility vehicle at this time if you are acting rationally.
C)If you do not purchase the new sport utility vehicle, your net loss will be $2,000.
D)If you are acting rationally, you will purchase sport utility vehicles until the marginal cost of doing so falls to $20,000.

Question 47

If people follow the rule of rational choice they will choose options that they think will:

A)create more average benefits than average costs
B)create more additional costs than additional benefits
C)create equivalent additional benefits and additional costs
D)create more additional benefits than additional costs

Question 48

Which of the following policies would be most effective in promoting monthly water conservation?

A)A $100 flat fee for any household that uses over 1500 gallons
B)A per gallon fee that escalates from $1.00 to $2.00 per 25 gallons once household consumption exceeds 1,000 gallons
C)A $125 fee for all households in addition to a $0.50 per gallon fee for all consumption
D)A $200 fee for all households with zero charge per gallon of consumption
E)A $50 fee for all households with zero charge per gallon of consumption

Question 49

Rational choices:

A)are based on a comparison of total benefits and total costs.
B)can only be made by those who are economists.
C)are made based on expectations of the additional benefits and additional costs involved.
D)measure benefits based on the past.
E)are always motivated by concern for others.

Question 50

Several political leaders have proposed that parents be granted a substantially larger reduction in their annual personal income taxes for each child that they parent.The economic way of thinking indicates that legislation of this type would:

A)make it more expensive for parents to provide for their children.
B)reduce the value of children to their parents and therefore lead to a reduction in the birth rate.
C)reduce the after-tax cost of raising children and therefore increase the birth rate.
D)exert no impact on either the cost of raising children or the birth rate since parenting children is a non-economic activity.

Question 51

Jared declines to purchase a new bicycle priced at $200.An economist would conclude that:

A)Jared does not enjoy riding a bicycle.
B)the expected marginal benefit of the bicycle to Jared exceeds $200.
C)the expected marginal benefit of the bicycle to Jared is less than $200.
D)the expected marginal benefit of the bicycle to Jared is less than $100.
E)the bicycle seller is trying to take advantage of Jared by charging an exorbitant price.

Question 52

Gallons of milk at a local grocery store are priced at one for $4.00, or two for $6.00.The marginal cost of buying a second gallon of milk:

A)equals $6.00.
B)equals $4.00.
C)equals $3.00.
D)equals $2.00.
E)equals zero dollars.

Question 53

Individuals will only pursue an activity if:

A)E(MB) > E(MC).
B)E(MB) = E(MC).
C)E(MB) < E(MC).
D)none of these answers are true.

Question 54

The following table shows the marginal benefit to a consumer of DVD rentals. $$\begin{array} { c c } \text { DVD rentals per month } & \text { Marginal Benefit (in dollars) } \\1 & \$ 8.50 \\2 & \$ 7.50 \\3 & \$ 6.50 \\4 & \$ 5.50 \\5 & \$ 4.50 \\6 & \$ 3.50 \\7 & \$ 2.50 \\8 & \$ 1.50\end{array}$$ If the price of a DVD rental is $4, a consumer following the rule of rational choice will rent:

A)2 DVDs per month.
B)3 DVDs per month.
C)4 DVDs per month.
D)5 DVDs per month.
E)6 DVDs per month.

Question 55

The price of a ticket to the latest Broadway musical is $80.You will purchase a ticket if:

A)you are acting irrationally.
B)you place a lower valuation on seeing the musical than $80 but are extremely bored.
C)your expected marginal benefit from viewing the musical exceeds $80.
D)your expected marginal cost from viewing the musical exceeds $80.
E)your expected marginal benefit from viewing the musical is less than $80.

Question 56

Economists believe that in regards to criminal behavior:

A)people engage in criminal activity because they are genetically predisposed to do so.
B)those choosing to commit criminal acts weigh the expected marginal benefits versus the expected marginal costs.
C)individuals are irrational and don't respond to incentives.
D)economics can shed very little light on the subject.

Question 57

You lose $20 from your wallet and decide to miss an hour from work in order to search for it.To an economist, this means that:

A)you estimate the expected cost of searching for one hour to be greater than $20.
B)you must earn more than $20 per hour.
C)in your estimation the expected value of searching for the lost $20 for an hour exceeds your hourly wage.
D)you are irrational, since it is always a waste of time to search for lost money.
E)you place no value on your time.

Question 58

Henry must choose between going to his psychology class this evening or going on a double date.If he chooses to go on the date, the expected value of the psychology lecture:

A)is impossible to compare to the expected enjoyment from going on a date.
B)is likely greater than the expected marginal benefit from going on the date.
C)is likely less than the expected marginal benefit from going on the date.
D)is likely equal to the expected marginal benefit from going on the date.

Question 59

The marginal cost of a vacation in the south of France is $4,500.The marginal benefit to Druscilla of a vacation in the south of France is $4,800.

A)Druscilla will lose $300 if she vacations in the south of France.
B)Druscilla will experience a net gain of $300 if she vacations in the south of France.
C)Druscilla will be worse off if she vacations in the south of France.
D)Druscilla will enjoy a net gain of $4,800 if she vacations in the south of France.
E)It is irrational for Druscilla to vacation in the south of France when she can stay home and keep $4,500 in the bank.

Question 60

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette.An economist would conclude that:

A)in the man's judgment, the expected marginal cost of smoking the cigarette outweighs the expected marginal benefit.
B)the man is behaving irrationally.
C)the smoker is unconcerned about his future health.
D)in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.
E)smoking should be banned by the government in order to ensure the safety of smokers.

Question 61

A nation has a comparative advantage in the production of cars over another nation if:

A)it can produce cars with fewer resources than the other country.
B)it can produce cars at a lower opportunity cost than the other country.
C)it can produce cars at a higher opportunity cost than the other country.
D)it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.
E)it is more self-sufficient in all areas of production, including automobile manufacturing.

Question 62

Which of the following statements is most consistent with the rule of rational choice?

A)"The Environmental Protection Agency should strive to eliminate virtually all air and water pollution."
B)"When evaluating new prescription drugs, the Food and Drug Administration should weigh each drug's potential health benefits against the potential health risks posed by known side effects."
C)"Police forces should be enlarged until virtually all crime is eliminated."
D)"Manufacturers of automobiles should seek to make cars safer, no matter the costs involved."

Question 63

Assume the total benefits to Mark from trips to a local amusement park during the year are given by the following schedule: 1 trip: $60; 2 trips: $115; 3 trips: $165; 4 trips: $200; 5 trips: $225; 6 or more trips: $240.Which of the following is false?

A)Mark would not go to the park more than 6 times per year even if there was free admission.
B)Mark would not go at all if a single visit cost $65.
C)If the admission price was $20 per day, Mark would go 5 times per year.
D)If the amusement park offered no per day admission but only year-long passes for $200, Mark would be willing to buy one.
E)None of the above are false; all are true.

Question 64

Sergei makes millions of dollars a year playing hockey.Sergei is also the best tailor in his hometown in Russia.Why doesn't Sergei make his own clothes?

A)He has already made all the clothes he will need for a few years.
B)The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.
C)Sergei just can't find the material he likes in the United States.
D)Sergei has a comparative advantage in tailoring clothes.
E)The opportunity cost of making clothes instead of playing hockey is relatively low, so he should instead concentrate on his hockey career (for which the opportunity cost is very high).

Question 65

The marginal benefit of a slice of pizza is the:

A)maximum amount that a consumer is willing to pay for the slice.
B)total amount that a consumer is willing to pay for a whole pizza, divided by the number of slices.
C)difference between the value of the slice to the consumer and the price of the slice.
D)price of the slice of pizza.

Question 66

When a person possesses a comparative advantage in the production of one good or service, it:

A)means that the person's opportunity cost is higher than for that of other goods.
B)discourages specialization.
C)promotes greater self-sufficiency.
D)permits gains from trade to be realized due to a more efficient use of resources.

Question 67

Specialization is a way for:

A)individuals to make the best use of resources by devoting themselves to one primary productive activity.
B)society to become wealthier while not using their resources.
C)people to avoid having to trade.
D)increasing one's opportunity cost for an activity.

Question 68

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n):

A)disincentive to trade with others.
B)higher opportunity cost.
C)absolute advantage in production.
D)comparative advantage in production.
E)None of the above. People, regions, and countries should learn to be self-sufficient.

Question 69

The ability to produce at a lower opportunity cost than someone else is referred to as:

A)absolute advantage.
B)comparative advantage.
C)absolute superiority.
D)competitive disadvantage.
E)comparative disadvantage.

Question 70

If airfares to Europe were to increase, an economist would predict that:

A)most people will not change their travel and vacation plans.
B)more individuals will choose to fly to Europe because now it is a more valuable experience.
C)many individuals will substitute toward other travel destinations.
D)airlines will make significantly greater profits.

Question 71

Thelma, with no money in her bank account, estimates that there is a 25% chance that she will get caught stealing a Porsche.According to an economist, it may be rational for Thelma to steal the Porsche if:

A)the expected marginal costs outweigh the expected marginal benefits from doing so.
B)the expected marginal benefits outweigh the expected marginal costs from doing so.
C)None of the above are correct. It is inappropriate to apply economic theory to the analysis of criminal behavior.
D)None of the above are correct. Not even an economist would assert that it is rational to steal a car.

Question 72

Which of the following explains why people tend to dedicate their resources to one primary activity?

A)Opportunity costs
B)Negative incentives
C)Positive thinking
D)Fallacy of composition

Question 73

Pollution damages the environment we live in.An economist would advise that we reduce air pollution:

A)as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.
B)until the total benefit from air pollution reduction just equals the total cost of pollution reduction.
C)until air pollution levels reach near-zero levels.
D)to the levels experienced in the 1950s when air was much cleaner near big cities.

Question 74

The additional cost incurred as a result of undertaking an action is:

A)the opportunity benefit.
B)the marginal benefit.
C)the total cost.
D)the gross cost.
E)the marginal cost.

Question 75

Mike is able to complete a tax return in two hours earning a fee of $100.As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour.His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour.Both individuals could benefit if

A)Mike worked on tax returns for eight hours and paid Joe $5 for each car he washed
B)Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed.
C)Mike worked on tax returns for eight hours and paid Joe $15 for each car he washed
D)Joe worked on tax returns for eight hours and paid Mike $10 for each car he washed
E)Joe worked on tax returns for eight hours and paid Mike $15 for each car he washed

Question 76

Which of the following best defines rational behavior?

A)analyzing the total costs of a decision
B)analyzing the total benefits of a decision
C)undertaking an activity as long as the total benefit of all activities exceeds the total cost of all activities
D)undertaking activities whenever the marginal benefit exceeds the marginal cost
E)undertaking activities as long as the marginal benefit exceeds zero

Question 77

Ted has decided to buy a burger and fries at a restaurant, but is considering whether to buy a drink as well.If the price of a burger is $2, fries are $1, drinks are $1, but a value meal with all three costs $3.80, the marginal cost to Ted of the drink is:

A)$0.20
B)$0.80
C)$1.00
D)$3.80
E)impossible to determine from the above information.

Question 78

The additional benefit received as a result of undertaking an action is:

A)the opportunity cost.
B)the average benefit.
C)the marginal cost.
D)the marginal benefit.
E)the total benefit.

Question 79

The following table shows the marginal benefit to an individual of consuming pints of beer. $\begin{array} { c c } \text { Pints af beer } & \text { Marginal Benefit } \\1 & \$ 7.00 \\2 & \$ 5.00 \\3 & \$ 3.00 \\4 & \$ 2.00 \\5 & \$ 1.00 \\6 & \$ 0.50 \\7 & - \$ 1.00\end{array}$ If the price of each pint is $4.00 at this establishment, a rational consumer would purchase

A)1 beer
B)2 beers
C)3 beers
D)5 beers
E)6 beers

Question 80

According to the rule of rational choice, an individual will undertake an activity as long as:

A)the expected marginal benefit equals the expected marginal cost.
B)the expected marginal benefits are less than the expected marginal costs.
C)the expected marginal benefits are greater than the expected marginal costs.
D)total costs exceed total benefits.
E)total benefits exceed total costs.