Question 1

If an activity creates negative externalities:

Accepted Answer

A)   less of the activity is performed than is in the best interest of society.
B)   the marginal social cost of the activity has to be less than its private marginal cost.
C)   imposing taxes and other restraints on the activity's producers could be an appropriate policy to induce them to reduce the externalities.
D)   the level of the activity that maximizes society's net benefit is greater than the level that maximizes the net benefit of the individuals performing the activity.

Question 2

Under what circumstances would it be considered rational to be ignorant?

Accepted Answer

If there is a significant amount of info...

Question 3

An opportunity cost is the cost of acquiring a good or service or of taking an action measured in terms of a forgone alternative.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT an explicit cost?

Accepted Answer

A)   Wages paid to workers.
B)   Payments for raw materials.
C)   Rental payments for a building.
D)   Income the business owner could have earned working for someone else.

Question 5

Marginal utility and total utility are, respectively:

Accepted Answer

A)   the satisfaction from the least-liked good consumed, and the satisfaction from all the goods consumed.
B)   the satisfaction one person gets, and the satisfaction all people get from consuming a particular amount of a good.
C)   the satisfaction from consuming one type of good, and the satisfaction from consuming several different types of goods.
D)   the change in total satisfaction from consuming one more unit of a good, and the total satisfaction from consuming a particular amount of a good.

Question 6

The utilities from consuming different amounts of Good X are as follows.
 
-The marginal utility from consuming the second unit of Good X is:

Accepted Answer

A)   20 points.
B)   40 points.
C)   60 points.
D)   120 points.

Question 7

Net benefit is equal to:

Accepted Answer

A)   total benefit.
B)   total benefit minus total cost.
C)   total benefit plus marginal benefit.
D)   marginal benefit minus marginal cost.

Question 8

A business maximizes profit by operating where:

Accepted Answer

A)   total revenue equals total cost.
B)   marginal revenue equals total revenue.
C)   total revenue exceeds total cost by the greatest amount.
D)   marginal revenue exceeds marginal cost by the greatest amount.

Question 9

Given the table below, diminishing marginal utility sets in with the:

Accepted Answer

A)   1st unit consumed.
B)   2nd unit consumed.
C)   3rd unit consumed.
D)   4th unit consumed.

Question 10

A business will maximize its profit by operating at the output where marginal revenue:

Accepted Answer

A)   equals marginal cost.
B)   is less than marginal cost.
C)   is greater than marginal cost.
D)   and marginal cost are both greater than zero.

Question 11

Which of the following does NOT occur when net benefit is maximized?

Accepted Answer

A)   Marginal cost equals marginal benefit.
B)   Total benefit exceeds total cost by the greatest amount.
C)   The number that results when total cost is subtracted from total benefit is as large as possible.
D)   The additional satisfaction from consuming one more unit of the activity exceeds the additional cost by the greatest amount.

Question 12

-Based on this figure:

Accepted Answer

A)   net benefit is zero at 6.0 units of Good X consumed.
B)   total cost is at its minimum at 2.5 units of Good X consumed.
C)   net benefit is at its maximum at 2.5 units of Good X consumed.
D)   total benefit minus total cost is at its maximum at 6.0 units of Good X consumed.

Question 13

The choice to remain uninformed because the marginal cost of obtaining information is greater than the marginal benefit from knowing it:

Accepted Answer

A)   is not rational.
B)   is referred to as rational ignorance.
C)   illustrates why choices must be made collectively, rather than by individuals who possess incomplete information.
D)   has little effect on the outcome of a decision since the information is so costly that most other people are also uninformed.

Question 14

If revenues are $50,000, explicit costs are $40,000 and implicit costs are $10,000, then accounting and economic profit are, respectively:

Accepted Answer

A)   $0 and $10,000.
B)   $0 and $40,000.
C)   $10,000 and $0.
D)   $10,000 and $40,000.

Question 15

On the basis of the following table you can conclude that diminishing marginal utility:

Accepted Answer

A)   sets in with the 2nd unit consumed.
B)   sets in with the 3rd unit consumed.
C)   sets in with the 4th unit consumed.
D)   does not set in with any of the units consumed.

Question 16

-Based on this figure, marginal benefit equals marginal cost at:

Accepted Answer

A)   6 units of activity.
B)   9 units of activity.
C)   12 units of activity.
D)   none of the above.

Question 17

Net benefit is equal to:

Accepted Answer

A)   total benefit - total cost.
B)   total benefit - marginal benefit.
C)   marginal benefit/marginal cost.
D)   marginal benefit - marginal cost.

Question 18

If a firm is earning a profit and is operating at the output level where its marginal revenue exceeds its marginal cost by the greatest amount, the firm:

Accepted Answer

A)   is maximizing its profit at that output level.
B)   could increase its profit by increasing its output level.
C)   could increase its profit by decreasing its output level.
D)   is operating at the output level where total revenue equals total cost.

Question 19

Total cost to a business is the:

Accepted Answer

A)   change in the cost when one more unit is produced.
B)   cost per unit produced.
C)   cost of producing a specific number of units.
D)   difference between explicit and implicit cost.

Question 20

To maximize net benefit to society from an activity, its:

Accepted Answer

A)   social marginal benefits must equal its social marginal costs.
B)   private marginal benefits must equal its social marginal costs.
C)   social marginal benefits must equal its private marginal costs.
D)   private marginal benefits must equal its private marginal costs.

Exam 11: Benefits, Costs, and Maximization

The utilities from consuming different amounts of Good X are as follows. -The marginal utility from consuming the second unit of Good X is:

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A business maximizes profit by operating where:

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Total cost to a business is the:

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Which of the following is NOT an explicit cost?

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Net benefit is equal to:

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If a firm is earning a profit and is operating at the output level where its marginal revenue exceeds its marginal cost by the greatest amount, the firm:

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Net benefit is equal to:

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Which of the following does NOT occur when net benefit is maximized?

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-Based on this figure:

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Given the table below, diminishing marginal utility sets in with the:

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-Based on this figure, marginal benefit equals marginal cost at:

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If an activity creates negative externalities:

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The choice to remain uninformed because the marginal cost of obtaining information is greater than the marginal benefit from knowing it:

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Under what circumstances would it be considered rational to be ignorant?

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If revenues are $50,000, explicit costs are $40,000 and implicit costs are $10,000, then accounting and economic profit are, respectively:

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To maximize net benefit to society from an activity, its:

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Marginal utility and total utility are, respectively:

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On the basis of the following table you can conclude that diminishing marginal utility:

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A business will maximize its profit by operating at the output where marginal revenue:

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An opportunity cost is the cost of acquiring a good or service or of taking an action measured in terms of a forgone alternative.

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If there is a significant amount of info...
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