經濟學原理對應練習

1.ThewordthatcomesfromtheGreekwordfornonewhomanagesa

household"is

a.market.

b.consumer.

c.producer.

d.economy.

2.Theword“economy“comesfromtheGreekwordoikononios,which

means

a.”environment.”

b.“production.”

c."onewhomanagesahousehold.^^

d.”onewhomakesdecisions.”

3.Resourcesare

a.scarceforhouseholdsbutplentifulforeconomies.

b.plentifulforhouseholdsbutscarceforeconomies.

c.scarceforhouseholdsandscarceforeconomies.

d.plentifulforhouseholdsandplentifulforeconomies.

4.Economicsdealsprimarilywiththeconceptof

a.scarcity.

D^poverty^

c.change.

d.power.

5.Whichofthefollowingquestionsisnotansweredbythedecisionsthat

everysocietymustmake?

a.Whatdeterminesconsumerpreferences?

c.Whowillproducethegoods?

d.Whowillconsumethegoods?

6.Theoverridingreasonastowhyhouseholdsandsocietiesfacemany

decisionsisthat

a.resourcesarescarce.

D^ooa^n^emce^irenotscarce.

c.incomesfluctuatewithbusinesscycles.

d.people,bynature,tendtodisagree.

7.Thephenomenonofscarcitsytemsfromthefactthat

a.mosteconomies'productionmethodsarenotverygood.

b.inmosteconomies,wealthypeopleconsumedisproportionate

quantitiesofgoodsandservices.

c.governmentsrestrictsproductionoftoomanygoodsandservices.

d.resourcesarelimited.

8.Approximatelywhatpercentageoftheworld'seconomiesexperience

scarcity?

a.25%

b.50%

c.75%

9.Whenasocietycannotproduceallthegoodsandservicespeoplewishto

have,itissaidthattheeconomyisexperiencing

a.scarcity.

D^nortages.

c.inefficiencies.

d.inequities.

10.Forsociety,agoodisnotscarceif

a.atleastoneindividualinsocietycanobtainallheorshewantsofthe

good.

b.firmsareproducingthegoodatfullcapacity.

c.allmembersofsocietycanhavealltheywantofthegood.

d.thosewhohaveenoughincomecanbuyalltheywantofthegood.

11.Whichofthefollowingproductswouldbeconsideredscarce?

a.golfclubs

b.Picassopaintings

c.apples

d.AlloftheabovearecoiTect.

12.Economicsisthestudyof

a.productionmethods.

b.howsocietymanagesitsscarceresources.

c.howhouseholdsdecidewhoperformswhichtasks.

d.theinteractionofbusinessandgovernment.

14.Inmostsocieties,resourcesareallocatedby

a.asinglecentralplanner.

b.asmallnumberofcentralplanners.

c.thosefirmsthatuseresourcestoprovidegoodsandservices.

d.thecombinedactionsofmillionsofhouseholdsandfirms.

15.Theadage,nThereisnosuchthingasafreelunch,"isusedtoillustrate

theprinciplethat

a.goodsarescarce.

b.peoplefacetradeoffs.(togetsomethingwelike,weusuallyhaveto

giveupanotherthingwelike)

c.incomemustbeearned.

d.householdsfacemanydecisions.

18.Whichofthefollowingstatementsbestrepresentstheprinciple

representedbytheadage,"Thereisnosuchthingasafreelunch"?

a.Melissacanattendtheconcertonlyifshetakeshersisterwithher.

b.Gregishungryandhomeless.

c.Brianmustrepairthetireonhisbikebeforehecanrideittoclass.

d.KendramustdecidebetweengoingtoColoradoorCancunforspring

break.

19.Theprinciplethat“peoplefacetradeoffs11appliesto

a.individuals.

b.families.

c.societies.

d.Alloftheabovearecorrect.

20.Atypicalsocietystrivestogetthemostitcanfromitsscarceresources.

Atthesametime,thesocietyattemptstodistributethebenefitsofthose

resourcestothemembersofthesocietyinafairmanner.Inotherwords,

thesocietyfacesatradeoffbetween

a.gunsandbutter.

b.efficiencyandequity.

c.inflationandunemployment.

d.workandleisure.

21.Gunsandbutterareusedtorepresenttheclassicsocietaltradeoff

betweenspendingon

a.durableandnondurablegoods.

b.importsandexports.

c.nationaldefenseandconsumergoods.

d.lawenforcementandagriculture.

22.Whensocietyrequiresthatfirmsreducepollution,thereis

a.atradeoffbecauseofreducedincomestothefirms'ownersand

workers.

b.^rnoeoifonlyifsomefirmsareforcedtoclose.

c.notradeoff,sincethecostofreducingpollutionfallsonlyonthefirms

affectedbytherequirements.

d.notradeoff,sinceeveryonebenefitsfromreducedpollution.

23.Atradeoffexistsbetweenacleanenvironmentandahigherlevelof

incomeinthat

a.studiesshowthatindividualswithhigherlevelsofincomeactually

pollutelessthanlow-incomeindividuals.

b.effortstoreducepollutiontypicallyarenotcompletelysuccessful.

c.lawsthatreducepollutionraisecostsofproductionandreduce

incomes.

d.byemployingindividualstocleanuppollution,employmentand

incomebothrise.

24.Whichofthefollowingphrasesbestcapturesthenotionofefficiency?

a.absolutefairness

b.equaldistribution

c.minimumwaste

d.equitableoutcome

25.Whichofthefollowingistrue?

a.Efficiencyreferstothesizeoftheeconomicpie;equityreferstohow

thepieisdivided.

b.Governmentpoliciesusuallyimproveuponbothequityandefficiency.

c.Aslongastheeconomicpiecontinuallygetslarger,noonewillhave

togohungry.

d.Efficiencyandequitycanbothbeachievediftheeconomicpieiscut

intoequalpieces.

26.Efficiencymeansthat

a.societyisconservingresourcesinordertosavethemforthefuture,

b.society'sgoodsandservicesaredistributedequallyamongsociety's

members.

c.society'sgoodsandservicesaredistributedfairly,thoughnot

necessarilyequally,amongsociety'smembers.

d.societyisgettingthemaximumbenefitsfromitsscarceresources.

27.Economistsusethewordequitytodescribeasituationinwhich

a.eachmemberofsocietyhasthesameincome.

b.eachmemberofsocietyhasaccesstoabundantquantitiesofgoodsand

services,regardlessofhisorherincome.

c.societyisgettingthemaximumbenefitsfromitsscarceresources.

d.thebenefitsofsociety'sresourcesaredistributedfairlyamong

society'smembers.

28.SenatorSmithwantstoincreasetaxesonpeoplewithhighincomesand

usethemoneytohelpthepoor.SenatorJonesarguesthatsuchataxwill

discouragesuccessfulpeoplefromworkingandwillthereforemake

societyworseoff.Aneconomistwouldsaythat

a.weshouldagreewithSenatorSmith.

b.weshouldagreewithSenatorJones.

c.agooddecisionrequiresthatwerecognizebothviewpoints.

Oner^r^i^raaeon^etweei^quit^n^rticiency^^^^

29.Whichofthefollowingwordsandphrasesbestcapturesthenotionof

equity2

a.minimumwaste

b.maximumbenefit

c.sameness

d.fairness

ANS:DDIF:1REF:1-1

TOP:EquityMSC:Definitional

30.Whengovernmentpoliciesareenacted,

a.equitycanusuallybeenhancedwithoutanefficiencyloss,but

efficiencycanneverbeenhancedwithoutanequityloss.

b.efficiencycanusuallybeenhancedwithoutanequityloss,butequity

canneverbeenhancedwithoutanefficiencyloss.

c.itisalwaysthecasethateitherefficiencyandfairnessareboth

enhanced,orefficiencyandequityarebothdiminished.

d.Noneoftheabovearecorrect.

ANS:DDIF:2REF:1-1

TOP:Government,Efficiency,EquityMSC:Applicative

31.Alikelyeffectofgovernmentpoliciesthatredistributeincomeand

wealthfromthewealthytothepooristhatthosepolicies

a.enhanceequity.

b.reduceefficiency.

c.reducetherewardforworkinghard.

d.Alloftheabovearecorrect.

ANS:DDIF:2REF:1-1

TOP:Government,Efficiency,EquityMSC:Interpretive

32.Whenthegovernmentimplementsprogramssuchasprogressiveincome

taxrates,whichofthefollowingislikelytooccur?

a.Equityisincreasedandefficiencyisincreased.

b.Equityisincreasedandefficiencyisdecreased.

c.Equityisdecreasedandefficiencyisincreased.

d.Equityisdecreasedandefficiencyisdecreased.

ANS:BDIF:2REF:1-1

TOP:Government,Efficiency,EquityMSC:Interpretive

33.Asaresultofasuccessfulattemptbygovernmenttocuttheeconomicpie

intomoreequalslices,

a.itiseasiertocutthepie,andthereforetheeconomycanproducea

largerpie.

b.thegovernmentcanmoreeasilyallocatethepietothosemostinneed.

c.thepiegetssmaller,andtherewillbelesspieoverall.

d.governmentwillspendtoomuchtimecuttinganditcausesthe

economytolosetheabilitytoproduceenoughpieforeveryone.

ANS:CDIF:3REF:1-1

TOP:Government,Efficiency,EquityMSC:Analytical

34.Whenthegovernmentattemptstoimproveequityinaneconomythe

resultisoften

a.anincreaseinoveralloutputintheeconomy.

b.additionalgovernmentrevenuesinceoverallincomewillincrease.

c.areductioninequity.

d.areductioninefficiency.

ANS:DDIF:2REF:1-1

TOP:Government,Efficiency,EquityMSC:Interpretive

35.Whenthegovernmentredistributesincomefromthewealthytothepoor,

a.efficiencyisimproved,butequityisnot.

b.bothwealthypeopleandpoorpeoplebenefitdirectly.

c.peopleworklessandproducefewergoodsandservices.

d.wealthypeopleconsumefewergoods,butpoorpeopleconsumemore

goods,resultinginnorealchange.

ANS:CDIF:2REF:M

TOP:Government,Efficiency,EquityMSC:Interpretive

36.Ineconomics,thecostofsomethingis

a.thedollaramountofobtainingit.

b.alwaysmeasuredinunitsoftimegivenuptogetit.

c.whatyougiveuptogetit.

d.oftenimpossibletoquantify,eveninprinciple.

ANS:CDIF:1REF:1-1

TOP:OpportunitycostMSC:Definitional

37.Whatyougiveuptoobtainanitemiscalledyour

a.opportunitycost.

b.explicitcost.

c.truecost.

d.directcost.

ANS:ADIF:1REF:1-1

TOP:OpportunitycostMSC:Definitional

38.Theopportunitycostofgoingtocollegeis

a.thetotalspentonfood,clothing,books,transportation,tuition,lodging,

andotherexpenses.

b.thevalueofthebestopportunityastudentgivesuptoattendcollege.

c.zeroforstudentswhoarefortunateenoughtohavealloftheircollege

expensespaidbysomeoneelse.

d.zero,sinceacollegeeducationwillallowastudenttoearnalarger

incomeaftergraduation.

ANS:BDIF:2REF:M

TOP:OpportunitycostMSC:Interpretive

39.Mauricereceives$100asabirthdaygift.Indecidinghowtospendthe

money,henarrowshisoptionsdowntofourchoices:OptionA,OptionB,

OptionC,andOptionD.Eachoptioncosts$100.Finallyhedecideson

OptionB.Theopportunitycostofthisdecisionis

a.thevaluetoMauriceoftheoptionhewouldhavechosenhadOptionB

notbeenavailable.

b.thevaluetoMauriceofOptionsA,CandDcombined.

c.$100.

d.$300.

ANS:ADIF:2REF:1-1

TOP:OpportunitycostMSC:Applicative

40.Afurnituremakercurrentlyproduces100tablesperweekandsellsthem

foraprofit.Sheisconsideringexpandingheroperationinordertomake

moretables.Shouldsheexpand?

a.Yes,becausemakingtablesisprofitable.

b.No,becauseshemaynotbeabletoselltheadditionaltables.

c.Itdependsonthemarginalcostofproducingmoretablesandthe

marginalrevenueshewillearnfromsellingmoretables.

d.Itdependsontheaveragecostofproducingmoretablesandthe

averagerevenueshewillearnfromsellingmoretables.

ANS:CDIF:2REF:1-1

TOP:MarginalchangesMSC:Applicative

41.Formoststudents,thelargestsinglecostofacollegeeducationis

a.thewagesgivenuptoattendschool.

b.tuition,fees,andbooks.

c.roomandboard.

d.transportation,parking,andentertainment.

ANS:ADIF:2REF:1-1

TOP:OpportunitycostMSC:Interpretive

42.Foracollegestudentwhowishestocalculatethetruecostsofgoingto

college,thecostsofroomandboard

a.shouldbecountedinfull,regardlessofthecostsofeatingandsleeping

elsewhere.

b.shouldbecountedonlytotheextentthattheyaremoreexpensiveat

collegethanelsewhere.

c.usuallyexceedtheopportunitycostofgoingtocollege.

d.plusthecostoftuition,equalstheopportunitycostofgoingtocollege.

ANS:BDIF:2REF:1-1

TOP:OpportunitycostMSC:Applicative

43.Forwhichofthefollowingindividualswouldtheopportunitycostof

goingtocollegebehighest?

a.apromisingyoungmathematicianwhowillcommandahighsalary

oncesheearnshercollegedegree

b.astudentwithaveragegradeswhohasneverheldajob

c.afamous,highly-paidactorwhowantstotaketimeawayfromshow

businesstofinishcollegeandearnadegree

d.astudentwhoisthebestplayeronhiscollegebasketballteam,butwho

lackstheskillsnecessarytoplayprofessionalbasketball

ANS:CDIF:2REF:1-1

TOP:OpportunitycostMSC:Applicative

44.Whenyoucalculateyourtruecostsofgoingtocollege,whatportionof

yourroom-and-boardexpensesshouldbeincluded?

a.Yourfullroom-and-boardexpensesshouldalwaysbeincluded.

b.Noneofyourroom-and-boardexpensesshouldeverbeincluded.

c.Youshouldincludeonlytheamountbywhichyourroom-and-board

expensesexceedtheincomeyouearnwhileattendingcollege.

d.Youshouldincludeonlytheamountbywhichyourroom-and-board

expensesexceedtheexpensesforrentandfoodifyouwerenotin

college.

ANS:DDIF:2REF:1-1

TOP:OpportunitycostMSC:Applicative

45.Theopportunitycostofanitemis

a.thenumberofhoursneededtoearnmoneytobuytheitem.

b.whatyougiveuptogetthatitem.

c.usuallylessthanthedollarvalueoftheitem.

d.thedollarvalueoftheitem.

ANS:BDIF:1REF:1-1

TOP:OpportunitycostMSC:Definitional

46.Mallorydecidestospendthreehoursworkingovertimeratherthan

watchingavideowithherfriends.Sheearns$8anhour.Heropportunity

costofworkingis

a.the$24sheearnsworking.

b.the$24minustheenjoymentshewouldhavereceivedfromwatching

thevideo.

c.theenjoymentshewouldhavereceivedhadshewatchedthevideo.

d.nothing,sinceshewouldhavereceivedlessthan$24ofenjoyment

fromthevideo.

ANS:CDIF:3REF:1-1

TOP:OpportunitycostMSC:Applicative

47.Russellspendsanhourstudyinginsteadofplayingtennis.The

opportunitycosttohimofstudyingis

a.theimprovementinhisgradesfromstudyingforthehour.

b.theimprovementinhisgradesfromstudyingminustheenjoymentof

playingtennis.

c.theenjoymentandexercisehewouldhavereceivedhadheplayed

tennis.

d.zero.SinceRussellchosetostudyratherthantoplaytennis,thevalue

ofstudyingmusthavebeengreaterthanthevalueofplayingtennis.

ANS:CDIF:3REF:1-1

TOP:OpportunitycostMSC:Applicative

48.College-ageathleteswhodropoutofcollegetoplayprofessionalsports

a.arenotrationaldecisionmakers.

b.arewellawarethattheiropportunitycostofattendingcollegeisvery

high.

c.areconcernedmoreaboutpresentcircumstancesthantheirfuture.

d.underestimatethevalueofacollegeeducation.

ANS:BDIF:2REF:1-1

TOP:OpportunitycostMSC:Interpretive

49.Arationaldecisionmaker

a.ignoresmarginalchangesandfocusesinsteadon"thebigpict

b.ignoresthelikelyeffectsofgovernmentpolicieswhenheorshemakes

choices.

c.takesanactiononlyifthemarginalbenefitofthatactionexceedsthe

marginalcostofthataction.

d.takesanactiononlyifthecombinedbenefitsofthatactionand

previousactionsexceedthecombinedcostsofthatactionandprevious

actions.

ANS:CDIF:2REF:1-1

TOP:MarginalchangesMSC:Interpretive

50.Rationalpeoplemakedecisionsatthemarginby

a.followingmarginaltraditions.

b.behavinginarandomfashion.

c.thinkinginblack-and-whiteterms.

d.comparingmarginalcostsandmarginalbenefits.

ANS:DDIF:1REF:1-1

TOP:MarginalchangesMSC:Interpretive

51.Theword"margin"means

a.edge.

b.distance.

c.space.

d.measure.

ANS:ADIF:1REF:1-1

TOP:MarginalchangesMSC:Definitional

52.Makingrationaldecisions"atthemargin"meansthatpeople

a.makethosedecisionsthatdonotimposeamarginalcost.

b.evaluatehoweasilyadecisioncanbereversedifproblemsarise.

c.comparethemarginalcostsandmarginalbenefitsofeachdecision.

d.alwayscalculatethemarginaldollarcostsforeachdecision.

ANS:CDIF:2REF:1-1

TOP:MarginalchangesMSC:Interpretive

53.Aperson'swillingnesstopayforagoodisbasedon

a.theavailabilityofthegood.

b.themarginalbenefitthatanextraunitofthegoodwouldprovidefor

thatperson.

c.themarginalcostofproducinganextraunitofthegood.

d.esotericfactors,thestudyofwhichliesbeyondtheboundariesof

economics.

ANS:BDIF:2REF:1-1

TOP:MarginalchangesMSC:Interpretive

54.Tosaythat"peoplerespondtoincentives"istosaythat

a.changesincosts(butnotchangesinbenefits)influencepeople's

decisionsandtheirbehavior.

b.changesinbenefits(butnotchangesincosts)influencepeople's

decisionsandtheirbehavior.

c.changesinbenefitsorchangesincostsinfluencepeople'sdecisions

andtheirbehavior.

d.tradeoffscanbeeliminatedbyrationalpeoplewhothinkatthemargin.

ANS:CDIF:1REF:1-1

TOP:IncentivesMSC:Definitional

55.Amarginalchangeisa

a.changethatinvolveslittle,ifanything,thatisimportant.

b.large,significantadjustment.

c.changefortheworse,andsoitisusuallyashort-termchange.

d.small,incrementaladjustment.

ANS:DDIF:1REF:1-1

TOP:MarginalchangesMSC:Definitional

56.Whichofthefollowingisthebestexampleofamarginalchange?

a.Aftergraduatingcollege,Audrey'sincomeincreasesfrom$50()per

monthto$3,000permonth.

b.Morgangetsaraiseatherpart-timejobandisnowpaid$7.25perhour

insteadof$7.00.

c.Housingpricesinanareaincreaseby40percentwhenanewinterstate

isbuiltthatpassesnearby.

d.AhardfreezewipesouthalfoftheorangecropinFloridaandtheprice

oforangejuicedoubles.

ANS:BDIF:2REF:1-1

TOP:MarginalchangesMSC:Applicative

57.Whichofthefollowingisthebestexampleofamarginalchange?

a.ThepriceofhousinginDenverincreasedby6percentlastyear.

b.Kimgetsabigpromotionatwork.Shealsogetsaraisefrom$35,000

peryearto$55,000peryear.

c.Markgraduatesfromcollegeandtakesajob.Hisincomeincreases

from$10,000peryearto$35,000peryear.

d.AdroughthitstheupperMidwestandthepriceofwheatincreases

from$4.00perbushelto$6.50perbushel.

ANS:ADIF:2REF:1-1

TOP:MarginalchangesMSC:Applicative

58.Amarginalchangeisbestillustratedbywhichofthefollowing?

a.Nancyretiresandtakesapart-timejob.Shewasworking40hoursper

weekandnowworks15hoursperweek.

b.Alarge,state-supporteduniversityhasannouncedthatduetostate

budgetdeficits,tuitionmustriseby20percentnextyear.

c.Ryanmovedtoanewapartmentandnowpays40percentmorerent

thanbefore.

d.Arizona,whichusuallyreceives10inchesofrainperyear,received11

incheslastyear.

ANS:DDIF:2REF:1-1

TOP:MarginalchangesMSC:Interpretive

59.Teresaeatsthreeorangesduringaparticularday.Themarginalbenefit

sheenjoysfromeatingthethirdorange

a.canbethoughtofasthetotalbenefitTeresaenjoysbyeatingthree

orangesminusthetotalbenefitshewouldhaveenjoyedbyeatingjust

thefirsttwooranges.

b.determinesTeresa'swillingnesstopayforthefirst,second,an

oranges.

c.doesnotdependonhowmanyorangesTeresahasalreadyeaten.

d.Alloftheabovearecorrect.

ANS:ADIF:3REF:1-1

TOP:MarginalchangesMSC:Applicative

60.Arationaldecisionmakertakesanactionifandonlyif

a.themarginalbenefitoftheactionexceedsthemarginalcostofthe

action.

b.themarginalcostoftheactionexceedsthemarginalbenefitofthe

action.

c.themarginalcostoftheactioniszero.

d.theopportunitycostoftheactioniszero.

ANS:ADIF:1REF:1-1

TOP:MarginalchangesMSC:Interpretive

61.Aftermuchconsideration,youhavechosenCancunoverFt.Lauderdale

asyourSpringBreakdestinationthisyear.However,SpringBreakisstill

monthsaway,andyoumayreversethisdecision.Whichofthefollowing

eventswouldpromptyoutoreversethisdecision?

a.ThemarginalbenefitofgoingtoCancunincreases.

b.ThemarginalcostofgoingtoCancundecreases.

c.ThemarginalbenefitofgoingtoFt.Lauderdaledecreases.

d.ThemarginalcostofgoingtoFt.Lauderdaledecreases.

ANS:DDIF:3REF:1-1

TOP:MarginalchangesMSC:Applicative

62.Theaveragecostperseatonthe50-passengerFloating-On-AirBus

company'stripfromKansasCitytoSt.Louis,onwhichnorefreshments

areserved,is$45,Inadvanceofaparticulartrip,threeseatsremain

unsold.Thebuscompanycouldincreaseitsprofitonlyifit

a.chargedanyticketpriceabove$0forthethreeremainingseats,

b.chargedatleast$15foreachofthethreeremainingseats,

c.chargedatleast$45foreachofthethreeremainingseats,

d.paidthreepeopletooccupythethreeremainingseats.

ANS:ADIF:2REF:1-1

TOP:MarginalcostMSC:Applicative

63.Warrendrinksfourcupsofcoffeeduringaparticularday.Themarginal

benefitheenjoysfromdrinkingthefourthcup

a.canbethoughtofasthetotalbenefitWarrenenjoysbydrinkingfour

cupsminusthetotalbenefithewouldhaveenjoyedbydrinkingjust

threecups.

b.determinesWarren9swillingnesstopayforthefourthcup.

c.islikelydifferentfromthemarginalbenefitprovidedtoWarrenbythe

thirdcup.

d.Alloftheabovearecorrect.

ANS:DDIF:3REF:1-1

TOP:MarginalchangesMSC:Applicative

64.Arationaldecisionmakertakesanactiononlyifthe

a.marginalbenefitislessthanthemarginalcost,

b.marginalbenefitisgreaterthanthemarginalcost,

c.averagebenefitisgreaterthantheaveragecost.

d.marginalbenefitisgreaterthanboththeaveragecostandthemarginal

cost.

ANS:BDIF:2REF:1-1

TOP:MarginalchangesMSC:Interpretive

65.Aconstructioncompanyhasbuilt50housessofarthisyearatatotalcost

tothecompanyof$8million.Ifthecompanybuildsa51sthouse,itstotal

costwillincreaseto$8.18million.Whichofthefollowingstatementsis

correct?

a.Forthefirst50houses,theaveragecostperhousewas$160,000.

b.Themarginalcostofthe51sthouse,ifitisbuilt,willbe$180,000.

c.Ifthecompanycanexperienceamarginalbenefitof$190,000by

buildingthe51sthouse,thenthecompanyshouldbuildit.

d.Alloftheabovearecorrect.

ANS:DDIF:3REF:1-1

TOP:Marginalcost,MarginalbenefitMSC:Applicative

66.Mikehasspent$500purchasingandrepairinganoldfishingboat,which

heexpectstosellfor$800oncetherepairsarecomplete.Mikediscovers

that,inadditiontothe$500hehasalreadyspent,heneedstomakean

additionalrepair,whichwillcostanother$400,inordertomaketheboat

worth$800topotentialbuyers.Hecanselltheboatasitisnowfor$300.

Whatshouldhedo?

a.Heshouldselltheboatasitisnowfor$300.

b.Heshouldkeeptheboatsinceitwouldnotberationaltospend$900on

repairsandthenselltheboatfor$800.

c.Heshouldcompletetherepairsandselltheboatfor$800.

d.Itdoesnotmatterwhichactionhetakes;theoutcomeisthesameeither

way.

ANS:CDIF:3REF:1-1

TOP:MarginalcostMSC:Analytical

67.Adonutshopsellsfreshbakeddonutsfrom5a.m.until3p.m.everyday.

Theshopdoesnotsellday-olddonuts,soallunsolddonutsarethrown

awayat3p.m.eachday.Thecostofmakingandsellingadozendonutsis

$1.50;therearenocostsassociatedwiththrowingdonutsaway.Ifthe

managerhas10dozendonutsleftat2:30p.m.onaparticularday,which

ofthefollowingalternativesismostattractive?

a.Lowerthepriceoftheremainingdonuts,evenifthepricefallsbelow

$1.50perdozen.

b.Lowerthepriceoftheremainingdonuts,butundernocircuinstances

shouldthepricefallbelow$1.50perdozen.

c.Throwthedonutsawayandproduce10fewerdozendonutstomorrow,

d.Startingtomorrow,lowerthepriceonalldonutssotheywillallbesold

earlierintheday.

ANS:ADIF:3REF:1-1

TOP:MarginalchangesMSC:Analytical

68.Stanbuysa1966Mustangfor$2,000,planningtorestoreandsellthecar.

Hegoesontospend$8,000restoringthecar.Atthispointhecansellthe

carfor$9,000.Asanalternative,hecanspendanadditional$3,000

replacingtheengine.Withanewenginethecarwouldsellfor$12,000.

Stanshould

a.completetherepairsandsellthecarfor$12,000.

b.sellthecarnowfor$9,000.

c.nevertrysuchanexpensiveprojectagain.

d.beindifferentbetween(i)sellingthecarnowand(ii)replacingthe

engineandthensellingit.

ANS:DDIF:3REF:1-1

TOP:MarginalcostMSC:Analytical

69.Sarahbuysandsellsrealestate.Twoweeksago,shepaid$140,000fora

houseonOakStreet,intendingtospend$20,000onrepairssellthehouse

for$175,000.Lastweek,thecitygovernmentannouncedaplantobuilda

"halfwayhouse,,forconvictedcriminalsonOakStreet.Asaresultofthe

city'sannouncedplan,Sarahisweighingtwoalternatives:Shecango

aheadwiththe$20,000inrepairsandthensellthehousefor$135,000,or

shecanforgotherepairsandsellthehouseasitisfor$120,000.Sarah

should

a.keepthehouseandlivei