Question 1

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?
A) She should sell the car now for $2000.
B) She should never sell something for less than it cost.
C) She should complete the repairs and sell the car.
D) It doesn't matter which action she takes; the outcome is the same either way.

Accepted Answer

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

Question 2

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?
A) if it charged no less than $250 for the seven remaining seats
B) if it charged more than $250 for the seven remaining seats
C) if it charged any ticket price above $0 for the remaining seats
D) if it left the seats empty

Accepted Answer

The answer of The average cost per seat on an...

Question 3

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?
A) He should take the $300.
B) He should never sell something for less than its cost.
C) He should complete the repairs and sell the boat.
D) It doesn't matter which action he takes; the outcome is the same either way.

Accepted Answer

If Mike completes the additional repair and sells the boat for $800, he will have spent a total of $900 ($500 for the purchase and initial repairs, plus $400 for the additional repair), but will have sold the boat for $800, resulting in a loss of $100.

If he sells the boat as it is now for $300, he will have spent a total of $500 on the purchase and initial repairs and earned $300 from the sale, resulting in a loss of $200.

Therefore, the best option for Mike is to complete the additional repair and sell the boat for $800, as this will result in the smallest loss.

Question 4

Suppose your management professor has been offered a corporate job with a 30 percent pay increase.Why has he decided to take the job?
A) The marginal cost of leaving was greater than the marginal benefit.
B) The marginal benefit of leaving was greater than the marginal cost.
C) The marginal benefit of teaching was greater than the marginal cost.
D) The marginal cost of teaching was greater than the marginal benefit.

Accepted Answer

The management professor has decided to take the corporate job because the marginal benefit of leaving (a 30 percent pay increase) is greater than the marginal cost (such as leaving a tenured position or leaving the teaching profession altogether). This would result in an overall increase in their utility or satisfaction.

Question 5

When policymakers make policies that change the costs and benefits that people face,what is the result for society?
A) people's behaviours are altered
B) people ignore incentives
C) inflation occurs
D) government revenue is reduced

Accepted Answer

When policymakers change the costs and benefits that people face, it alters their behavior in response to the incentives created by the policy. For example, if the government increases taxes on cigarettes, the cost of smoking increases and some people may quit, reducing the harm caused by smoking. Thus, policy changes can lead to positive or negative societal outcomes depending on the nature of the incentives created.

Question 6

What did Ralph Nader's book Unsafe at Any Speed cause the U.S.government to require?
A) child booster seats in all new cars
B) seat belts in all new cars
C) air bags in all new cars
D) stricter drunk driving laws

Accepted Answer

Ralph Nader's book Unsafe at Any Speed was published in 1965 and criticized the automotive industry for its lack of safety standards, particularly in the design of the Chevrolet Corvair. This book led to the establishment of the National Traffic and Motor Vehicle Safety Act in 1966, which required all new cars to have seat belts. Therefore, the correct choice is B, seat belts in all new cars.

Question 7

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?
A) She should take the $115,000.
B) She should never sell something for less than its cost.
C) She should complete the repairs and sell the cabin.
D) It doesn't matter which action she takes; the outcome is the same either way.

Accepted Answer

The answer of Monica has spent $120,000 purchasing and repairing...

Question 8

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?
A) He should complete the repairs and sell the car for $13,000.
B) He should sell the car now for $9000.
C) He should never try such an expensive project again.
D) He should be totally indifferent between finishing the project and selling the car now.

Accepted Answer

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

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?
A) She should complete the repairs for $4000 and sell the car for $15,000.
B) She should sell the car now for $11,000.
C) She should keep the car because selling it would be a loss.
D) She should be totally indifferent between finishing the project and selling the car now.

Accepted Answer

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

Question 10

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?
A) The marginal cost of leaving was greater than the marginal benefit.
B) The marginal benefit of leaving was greater than the marginal cost.
C) The marginal benefit of leaving was less than the marginal cost.
D) The marginal benefit of teaching was greater than the marginal cost.

Accepted Answer

The professor has considered the marginal benefit and cost of taking the job offer and has determined that the marginal benefit (the pay increase) is not greater than the marginal cost (the cost of leaving their current position, such as losing tenure, leaving behind established relationships with students and colleagues, etc.). Therefore, they have decided not to take the job.

Question 11

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?
A) if the marginal cost of teaching increased
B) if the marginal benefit of teaching increased
C) if the marginal cost of teaching decreased
D) if the marginal cost of a corporate job increased

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 12

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?
A) She should complete the repairs for $5000 and sell the car for $20,000.
B) She should sell the car now for $14,000.
C) She should keep the car for her own use because selling it would be a loss.
D) She should be totally indifferent between finishing the project and selling the car now.

Accepted Answer

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

Question 13

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?
A) He should take the $900.
B) He should never sell something for less than it cost.
C) He should complete the repairs and sell the Hummer.
D) It doesn't matter which action he takes; the outcome is the same either way.

Accepted Answer

If Tim completes the additional repair, he can sell the Hummer for $3500, which would result in a profit of $900 ($3500 - $2500 - $1100). However, if he sells it without the additional repair, he would only make a profit of $400 ($900 - $500, which is the cost of the initial repairs). Therefore, completing the repair and selling the Hummer would be the best choice for Tim.

Question 14

What has been the result of laws requiring that drivers wear seat belts?
A) a reduction in both driver deaths and pedestrian deaths
B) fewer accidents and fewer deaths per accident
C) fewer driver deaths,fewer accidents,and fewer pedestrian deaths
D) little change in the number of driver deaths,but more accidents and more pedestrian deaths

Accepted Answer

The answer of What has been the result of laws...

Question 15

When does a rational decision maker take an action?
A) only if the marginal benefit is less than the marginal cost
B) only if the marginal benefit is greater than the marginal cost
C) only if the average benefit is greater than the average cost
D) only if the marginal benefit is greater than both the average cost and the marginal cost

Accepted Answer

A rational decision maker will only take an action if the marginal benefit is greater than the marginal cost. This means that the additional benefit gained from taking the action is greater than the additional cost incurred. If the marginal benefit is less than the marginal cost, the decision maker would actually be better off not taking the action. Alternatively, if the average benefit is greater than the average cost, it may still not be a rational decision to take the action depending on the specific circumstances. Similarly, while the marginal benefit being greater than both the average cost and marginal cost is important, it is not the most important factor in the decision making process.

Question 16

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?
A) He should complete the repairs and sell the car for $19,000.
B) He should sell the car now for $16,000.
C) He should keep the car for his own use because selling it would be a loss.
D) He should be totally indifferent between finishing the project and selling the car now.

Accepted Answer

If Stan continues with the repair, he will spend a total of $19,000 ($15,000 initially and $4,000 more after spending $14,000). However, if he sells it without replacing the engine, he can sell it for $16,000, which means he will make a profit of $1,000 ($16,000 - $15,000). 
If he replaces the engine, he will spend a total of $24,000 ($15,000 initially plus $9,000 more for the repairs), but he plans to sell it for only $19,000. This means he would lose $5,000, which is not a wise financial decision. 
Therefore, it would be best for Stan to sell the car now for $16,000 and make a profit of $1,000 instead of risking a loss by spending an additional $5,000 on repairs.

Question 17

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?
A) Yes,because making tables is profitable.
B) No,because she may not be able to sell the additional tables.
C) It depends on the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables.
D) It depends on the average cost of producing more tables and the average revenue she will earn from selling more tables.

Accepted Answer

Whether or not the furniture maker should expand her operation depends on the relationship between the marginal cost of producing more tables and the marginal revenue she will earn from selling more tables. If the marginal cost is lower than the marginal revenue, then she should expand. If the marginal cost is higher than the marginal revenue, then she should not expand. Therefore, the best choice is C.

Question 18

According to economists,what do people respond to?
A) laws
B) incentives
C) threats more than rewards
D) positives,but not negatives

Accepted Answer

Economists believe that people respond to incentives, as they are motivated by the prospect of gaining something they desire. They are less likely to respond to threats or punishments, as these are seen as negative and can create resistance or avoidance behavior. Positive incentives, on the other hand, can encourage people to take action or change their behavior in order to achieve a desirable outcome. Laws may also have an impact on people's behavior, but they are often enforced through threats of punishment, rather than offering positive incentives. Therefore, B is the best answer choice.

Question 19

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?
A) He should take the $400.
B) He should never sell something for less than it cost.
C) He should complete the repairs and sell the motorcycle.
D) It doesn't matter which action he takes; the outcome is the same either way.

Accepted Answer

Completing the additional repair for $200 will bring the total cost of the motorcycle to $1,000. If Mike sells the motorcycle for $1,200 after the repair, he will make a profit of $200. This is better than selling the motorcycle in its current state for $400 or not selling it at all.

Question 20

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?
A) farmers to continue to feed grain to their livestock
B) farmers to start feeding bread to their livestock
C) city dwellers to start buying grain to make bread to eat
D) city dwellers to start buying grain to make bread to sell

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.

Quiz 1: Ten Principles of Economics

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?

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?

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?

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

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

What did Ralph Nader's book Unsafe at Any Speed cause the U.S.government to require?

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?

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?

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?

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?

What has been the result of laws requiring that drivers wear seat belts?

When does a rational decision maker take an action?

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?

According to economists,what do people respond to?

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?