SSEF2

A rational decision maker:

• ignores marginal changes and focuses instead on "the big picture".

• ignores the likely effects of government policies when he or she makes choices.

• takes an action only if the marginal benefit of that action exceeds the marginal cost of that action.

• takes an action only if the combined benefits of that action and previous actions exceed the combined costs of that action and previous actions.

Consumers make rational decisions about what they purchase every day. For example, Esther went to the supermarket to buy apples to make two pies. She needed at least five apples for each pie. Golden Delicious apples cost 25 cents a piece; a bag of 16 Golden Delicious apples costs $3.25. She bought the bag of Golden Delicious apples, even though she would have six apples left after making the pies. Which statement BEST describes Esther's choice?

• Esther decided the marginal benefit of having six more apples exceeded the marginal cost of paying 75 cents extra.

• Esther decided the marginal benefit of having six more Golden Delicious apples did not exceed the marginal cost of paying 75 cents extra.

• Esther compared the price per apple and decided the most expensive apples would be the best to buy, so she bought the bag.

• Esther compared the prices of the individual apples and the bag of apples and bought exactly the number of apples she needed to make two pies.

NXTX Incorporated currently has 10 workers. It would like to expand and hire more workers. Each additional worker will cost the company $100 per day. According to the information in the table, how many workers in total should NXTX Incorporated employ to maximize its profits?

• 11

• 12

• 13

• 14

Jamie must make an economic decision. He must choose whether or not to buy a new truck. After considering all the options, he concludes that the marginal costs of the truck are greater than the marginal benefits. In Jamie's case, buying the truck would be:

• a rational economic decision.

• an irrational economic decision.

• an opportunity cost.

• a productive choice.

MagnaFlare is a corporation that makes road flares. One of the primary components of a MagnaFlare is ground magnesium. How would the magnesium ore, from which ground magnesium is made, be classified as a factor of production?

• Capital
• Land
• Entrepreneurship
• It is not a factor of production, it is a product.

Brian wants to buy a soda and a box of popcorn at the movies. However, he only has enough money for one or the other. If Brian buys the soda, which of the following is his "opportunity cost"?

• the price of the soda
• the price of the popcorn
• the satisfaction of eating the popcorn
• his thirst

Paul wants to buy a classic sports car. Unfortunately, only a limited amount of dealers and collectors have the model car he wants. As a result, Paul will have to pay a high price, if he can even get the car at all. Paul is experiencing

• depreciation in the market
• severe inflation
• an embargo on cars
• scarcity

Frank owns his own printing firm. Since business has been going well, he wants to look at ways to increase his production. After assessing his resources and potential business he finds that the marginal benefit of hiring two new employees and buying new equipment will lead to greater profits and outweigh the extra costs he will spend. Frank's actions are an example of a(n)

• rational economic decision
• tradeoff
• opportunity cost
• trade barrier

Following a massive hurricane that hits Georgia's northern coast, residents have not running water or electricity. As a result, citizens buy up all of the flashlights and bottled water in the area faster than producers can supply them. What problem do people on the Georgia coast n ow face, regarding flashlights and bottled water? 

• Excessive rgulation
• Scaracity
• rationing
• incomplete tradeoffs

The act of giving up one thing in value to gain another thing of value is called an

• Opportunity cost
• Profit
• Marginal cost
• Tradeoff