Ch. 3 Economic Decisions Quiz (Genesis)

A rational decision benefits the decision maker as much as possible. To make a rational yes-or-no decision you should pick the option that has

• the highest benefit.

• the lowest cost.

• benefits that outweigh the costs.

• costs that outweigh the benefits.

Thinking like an economist would lead you to believe that for a gifted college football player, the most significant cost of remaining in college for another year rather than entering the NFL draft is

• tuition

• books

• housing

• lost wages

A student operating on her budget line for shoes and shirts

• would not be able to buy more shirts.

• would not be able to buy more shoes.

• would not be able to buy more shoes without buying more shirts.

• would not be able to buy more shoes without buying fewer shirts.

Which of the following would be considered a sunk cost?

• money you will spend to repair your car

• money you already spent to buy your car

• insurance premiums on your car for the coming six months

• the cost of gasoline to operate your car

The net benefit of a choice is

• the benefit of the choice plus the cost of the choice.

• the benefit of the choice minus the cost of the choice.

• the benefit of the choice times the cost of the choice.

• the benefit of the choice divided by the cost of the choice.

The decision-making rule for making a rational choice is best described by which of the following?

• Always buy the item with the lowest cost.

• Always buy the item with the highest benefit.

• Always buy the item with the lowest net benefit.

• Always buy the item with the highest net benefit.

The table below lists the benefit and cost of four different vacation destinations. Based on the information in the table, a rational consumer would pick.. (hint: the trip w/highest Net Benefit)

• Six Flags because it is the least expensive.

• the Grand Canyon because it has the highest net benefit.

• Disney World because it has the highest benefit.

• New Orleans because it has the lowest net benefit.

Which of the following accurately describes the concept of marginal benefit?

• the total benefit derived from consuming all units of a good

• the total benefit derived from consuming all units of a good minus the total cost of consuming all units of the good

• the additional benefit of consuming the next unit of a good

• the net benefit of consuming the next unit of a good

All of the following are mistakes to avoid in making rational decisions except

• letting sunk costs matter.

• focusing exclusively on fairness.

• making purchases using net benefit analysis.

• sticking to the status quo.

The branch of economics called behavioral economics combines economics and

• psychology

• history

• sociology

• accounting